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After seven years of trading, 2020 has presented unique and unforeseen challenges that have hindered the business’ future liquidity position including the Covid19 pandemic and proposed changes in the regulatory environment which mean that Wellesley may no longer be able to raise funding through the issue of listed bonds on Euronext Dublin.
As such, Wellesley has entered a course of action to restructure, recapitalise and address these challenges accordingly.
This website sets out this process and how it impacts investors.
What’s happening?
Wellesley took professional advice from specialist restructuring advisors Duff & Phelps and Shoosmiths to prepare a resolution that offers a better outcome for all investors. This included the sale of its loan book and a Company Voluntary Arrangement (CVA).
The creditors of Wellesley Finance Limited (formerly Plc) were given the opportunity to consider the CVA Proposal which - under Part I of the Insolvency Act 1986 and Part II of the Insolvency (England and Wales) Rules 2016 - required a majority 75% or more (by debt value) to be passed. The voting process was conducted by the Joint Nominees, being two licensed insolvency practitioners from Duff & Phelps.
As at the decision procedure deadline of 23:59pm on 13 October 2020, over 94% of the creditors of Wellesley Finance Limited who participated in the voting process had voted in favour of the CVA. The Joint Supervisors (formally the Joint Nominees) declared that the CVA was duly approved and on 14 October 2020 filed their Chairman’s Report at Court.
View and download the Chairman’s Report.
The password for this document can be found in the email sent to you on 24 September 2020.
Why is Wellesley restructuring?
Since launching in 2013, Wellesley’s priority was always to offer customers investment options to meet their needs. Over the years this saw the business evolve from offering peer-to-peer investment products to a selection of mini-bond investment products and, after acquiring FCA approval in February 2019, a listed bond programme which launched in July 2019.
Despite entering 2020 with a performing loan book and confidence in the business model, as the year has progressed the business came under increasing pressure for two key unforeseen circumstances:
Covid19
As you will be aware, the UK entered the depths of the biggest recession on record amidst the Covid19 pandemic. Indeed, all industries were put under additional pressure and we have seen many fellow financial service firms struggle since the UK first went into lockdown.
Throughout this period, the property development market was hit by stress and delays brought about by social distancing measures and issues within the supply chain. We worked closely with our borrowers to provide additional support where needed. Whilst Wellesley had been weathering the storm, it put increased pressure on the business and tightened margins and forecasts.
Ability to raise funds
In June 2020, the FCA announced proposed changes to the regulatory environment that would ban the sale of listed bonds. This ban, which has since been announced as permanent, significantly hindered Wellesley’s liquidity forecast and the business had to act fast to restructure and address these challenges. In doing so, Wellesley has been able to provide a more equitable outcome for investors.
How do the suggested resolutions provide a better outcome for investors?
The loan book sale
Primarily the sale of the loan book helps Wellesley’s secured investors (The Wellesley Property Mini-Bonds, The Wellesley Property Bond and Peer-to-Peer investments) by securing a better price for the loans than would otherwise have been likely in the event of a disorderly wind-down and distressed sale. The proceeds of this sale are being delivered on a pro-rata basis to the secured investors. By securing this outcome quickly, Wellesley has been able to preserve the underlying value of the loan book which can be returned to Wellesley’s investors.
Arranging an intra-group transfer for the sale of the loan book allowed Wellesley to secure a premium price for the loan book above the bids received on the open market. Furthermore, in ensuring the loan book continues to be managed by Wellesley, there is an opportunity for further value to be retained from the loan book to be passed onto unsecured investors.
The CVA
The CVA offered a lifeline to avoid a disorderly wind-down and seeks to provide a better outcome for all unsecured investors while causing minimum disruption. It is providing Wellesley with the time, resources and opportunity to deliver a better outcome for investors which may not otherwise be possible. The full proposal can be found here.
What is a CVA
A company voluntary arrangement (CVA) is a tool for businesses with solvency issues who wish to restructure and avoid the likely alternative of administration. Its purpose is to provide a recovery solution to provide a better outcome for its creditors.
It is a legally binding agreement between the business and its creditors that details how repayments of company debt should be formulated to provide a better outcome to creditors when versus the alternative option of administration. Typically, creditors would be parties such as landlords, trade creditors, or a bank to whom the business holds a loan with; however, in the case of Wellesley Finance Limited, this also includes its investors who are regarded as unsecured investors.
In order to ensure it delivers the best outcome for its investors, Wellesley has engaged specialist restructuring advisors from Duff & Phelps and Shoosmiths who have provided professional advice. Following this advice, the CVA Proposal has been drafted and sets out full details of how the business plans to restructure and recapitalise. This includes a detailed review of the financial outcome to creditors in the event of administration via an estimated outcome statement analysis exercise. As Wellesley has offered a variety of investment offerings each with unique terms, the estimated returns across each product are varied. Full details regarding this are available within the CVA Proposal.
Thank you
Thank you to all loyal investors who have supported Wellesley over the years. As plans to deliver a resolution progress, providing an improved outcome for investors will continue to remain a top priority.
Duff & Phelps
Duff & Phelps is global professional services advisory firm and an industry-leader of governance, risk and transparency solutions. Duff & Phelps and in particular their restructuring advisory and regulatory consulting practice groups were appointed to give Wellesley professional advice throughout the resolution and support the delivery of a better outcome for all creditors and customers.
As licensed insolvency practitioners, two Managing Directors from Duff & Phelps were appointed to act as Nominee and to provide a report in relation to the CVA Proposal as to whether in their independent view, the CVA has a reasonable prospect of being approved and implemented. Following a clear majority vote in favour of the CVA by the creditors of Wellesley Finance, the CVA was duly approved and the Supervisor (formerly the Nominee) filed their Chairman’s report at Court. The Supervisor will continue to monitor the implementation of the CVA by Wellesley Finance.
Shoosmiths
Shoosmiths is a major UK law firm.
Wellesley has appointed their corporate restructuring & advisory team who specialise in insolvency.
They are appointed to give legal advice to guide Wellesley throughout the CVA process and support the delivery of a better outcome for all creditors and customers.
Your capital is at risk and interest payments are not guaranteed. Investment in any Wellesley products are not covered by the Financial Services Compensation Scheme (FSCS).
Wellesley is the singular name for the following collective of companies, Wellesley Group Limited (09811856), Wellesley & Co Limited (07981279) and Wellesley Finance Limited (08331511). Wellesley Secured Finance Plc was established as a special purpose vehicle for the sole purpose of issuing asset backed securities and is not part of Wellesley Group.
Resolution Compliance Limited (FRN 574048). and Wellesley & Co Limited (FRN 631197) are authorised and regulated by the Financial Conduct Authority (FCA). Wellesley Secured Finance Plc and Wellesley Finance Limited are not authorised or regulated by the FCA.
Wellesley & Co Limited and Wellesley Finance Limited are registered in England and Wales and their registered office and trading address is at St Albans House, 57/59 Haymarket, London SW1Y 4QX. The registered address for Wellesley Secured Finance Plc is at 1 Bartholomew Lane, London, EC2N 2AX.
Resolution Compliance Limited (No. 07895493) is a limited company registered in England & Wales with registered office at 2nd Floor, 4 St Paul’s Churchyard, London, EC4M 8AY, United Kingdom.
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