Will bridging lenders look closer at bond issuance?

Just last week, specialist lender Together raised £375m via a bond issuance as it looked to further improve its financial position. 

In April 2015, bridging finance provider Funding 365 signed a deal with a UK bank for an eight-figure securitisation funding line. 

Mike Strange, managing director of Funding 365, said the key facts to consider when choosing a bond or bank facility funding included funding flexibility, funding cost, the security of the funding and ensuring that assets and liabilities were matched.

“Bank facilities are generally more flexible, whereas a bond issuance gives funding certainty, matches assets and liabilities and is generally somewhat cheaper.  

“Traditionally mortgage lenders would utilise bank facilities to ramp up their portfolio size to a point where it can be securitised and funded via bond issuance in the capital markets.  

“This method allows lenders to have maximum flexibility during the loan origination process and gives bond investors the opportunity to conduct due diligence on an existing portfolio prior to the takeout.”

According the Ashley Ilsen, head of lending at Regentsmead, both types of funding lines were susceptible to economic conditions. 

“If we see a downturn after we exit the EU, then I suspect we could see a significant drying up of both these funding lines.”

In August, a bridging lender was forced to pull out of a deal last minute following the alleged loss of some funding lines. 

Bob Sturges, head of PR and communications at Fortwell Capital, felt despite economic conditions the one bright spot that remained was real estate. 

“For lenders seeking to raise fresh funding, this could provide a boost to the bond issuance sector.

"But issuing a bond is not for novices.”

Bob pointed out that bond issues could be a complex, time-consuming process as well as being expensive. 

“…The issuer will need to be credible for investors to show interest.

"But at a time when the big banks are once again cherry-picking their lending opportunities, some smaller lenders may have no choice other than to go to the money markets."