Ex-Kaupthing CEO launches new lender

A new commercial lender has been launched in the UK market by ex-executives of Kaupthing Singer & Friedlander. Ortus Capital has created a name for itself within the pub and restaurant sector since 2010 and has now established a specialised lender, Ortus Secured Finance. Alexandra Jones spoke to the lender’s Chief Executive, Armann Thorvaldsson, to find out more…

What prompted the launch of Ortus Secured Finance?

Ortus Secured Finance was created by the founders of Ortus Capital, which is now an FSA authorised corporate finance boutique. Ortus Capital advises and arranges funding. We were finding very little debt financing available from the high street banks and so we needed to raise both debt and equity for transactions and clients. We therefore decided to set up a specified lending business. 

How did you identify the need for commercial funding in the UK?

We were advising a pub company called Red Oak Taverns on its acquisition of 32 freehold pubs and the company and we realised the difficulty in obtaining funding from high street banks. Clients, either directly or via contacts, were also contacting us looking for funding. We were therefore able to see the gap in the market first-hand. We expect to concentrate on areas where we have expertise, and are already invested, mainly in the pub and property sectors.

Could you explain a little bit more about the Red Oak Taverns acquisition?

We were approached by a team that wanted to buy the portfolio from administrators on behalf of Lloyds Bank and were looking for funding. We advised and arranged both debt and equity financing. The founders of Ortus Capital also invested in the equity alongside the management team.
 
Why do you think your main lending proposition for pubs is currently underserved in the UK?

According to the BBA, over the last two and a half years banks have turned away 49 per cent of new small business loan and overdraft applicants. In the hospitality sector 47 per cent of business owners have been forced to seek alternative sources of funding. 

We believe the key drivers are increased capital constraints and reduced lending on real estate, due to heavy losses incurred, and increased exposure, in relative terms, to the sector. Valuations on freehold pubs has come down significantly over the past few years  to a level that makes it interesting again to lend and invest in it.
 
Could you tell us a little about the professional backgrounds of the directors of Ortus?
 
Previously I was CEO of Kaupthing Singer & Friedlander, Orvar Kaernested was Deputy Head of Investment Banking at Kaupthing Bank and then Head of Private Equity at Stodir, and Richard Beenstock is a qualified accountant starting his career at Andersen and then Deloitte before moving on to Kaupthing Bank. We set up Ortus together in 2010.

Are you planning to obtain FSA authorisation in the future?

The current focus of the business doesn’t require an FSA license as we don’t plan to offer residential funding. The plan to obtain FSA authorisation will be driven by how the business develops and new products that we introduce.

Who do you foresee to be your biggest competitors in the commercial lending arena?

I wouldn't like to name any one in particular. There are obviously a number of lenders that have come into this market in the last few years, following the banking crises, and we see it as a very competitive market. We see success being determined by reliability and speed of execution and service, which I believe we deliver.

What are your thoughts on Government schemes (such as FLS) that have been launched in recent months?

I believe FLS and others schemes are steps in the right direction for the economy, however latest figures out last week confirm that FLS, whilst having some success, is not having the desired effects. There remains a chronic under supply of finance to SME’s and many potential borrowers still have very little access to finance. The Government also recognises this as Business Secretary Vince Cable has confirmed he asked the Bank of England to  “rethink”  how it can help SME’s via the Scheme.

Do you think the mainstream lenders have a competitive edge with increased liquidity in this respect?

Mainstream lenders will in general have a competitive edge compared to bridging lenders in those areas they choose to compete in due to their inherent access to cheap funding. However, because of historic problems, continued capital adequacy constraints and the lack of appetite to lend I don't really see them being fierce competitors in our space in the near future.