Funding Circle’s winding-down fund posted a total net asset value (NAV) return of 2.64 per cent for the three last months of 2020, declaring credit performance “resilient” despite the second wave of Covid-19.
However, this was a marked decline from the third quarter’s NAV return of 6.23 per cent.
The SME Credit Realisation Fund said that it “continues to make solid progress in returning capital to shareholders”. It declared a fourth-quarter dividend of approximately £1.8m (1.3125 pence per share).
The London-listed fund will return £25m (18 per cent of net assets) through a compulsory partial redemption at 84.77p, equivalent to NAV at 31 December, with payment on 27 January.
This will result in around 18 per cent of each shareholding being redeemed, according to analysis from brokerage Numis.
Loan and interest repayments over the quarter were £16.2m, $6.3m (£4.6m) and €5.4m (£4.8m) for the UK, US and Continental Europe portfolios respectively, compared to £21.4m, $8.1m and €6.1m in the third quarter.
Cash collections are expected to continue to modestly reduce as the portfolio seasons, the fund said.
“The ability of SME borrowers to satisfy their loan repayment obligations, and therefore the performance of the company, will continue to be affected by, inter alia, the path of Covid-19, local and national lockdowns as well as fiscal and monetary response, about which uncertainty remains,” it said. “Funding Circle continues to work with both investors and borrowers to provide ongoing support.”
Funding Circle announced in April 2019 that it was going to close down its Funding Circle SME Income Fund, which subsequently was renamed as the SME Credit Realisation Fund to reflect its winding-down status.
Last December, Funding Circle defended the sale of 280 of the fund’s loans to a debt buyer which is owned by US-based asset manager Elliott Management, following criticism that the lender’s actions were “very worrying”.
In October, the Funding Circle SME Credit Realisation Fund sold the bundle of defaulted loans to Azzurro Associates, an FCA-regulated practitioner which is owned by Elliott Management.
Peer2Peer Finance News understands that all loans went into default before the start of the pandemic, and the borrowers involved were notified by both Funding Circle and Azzurro shortly after the sale.
Funding Circle said that the loans represented a small fraction of the peer-to-peer lending platform’s overall loanbook and pointed out that all struggling borrowers are offered support including short-term payment plans.