Assets and background
After the financial crisis in 2007, conditions for traditional financing changed for many companies, due to increased liquidity coverage ratio in banks throughout the world. New conditions enabled access for other institutions, companies and individual investors to financing proposals that formerly, with few exceptions, had been reserved for banks. In North America labelled Direct Lending, and now an asset class globally worth around $812bn, the asset class has become popular for offering higher coupon returns than openly traded markets to an, for many, acceptable risk profile.
For companies not seeking to list their shares and with the possibility of issuing a debt based offering, not involving listing, it is normally important for the success of the issuance that:
- The business model can be easily understood by exterior parties.
- The company has fixed assets which are of considerable value in relation to the issued volume.
- When written contracts are in place, implying revenue in a forthcoming period, it facilitates.
- The company has enough margins to be able to repay the issued volume, although the company were to fall short of budget.
From investors' perspectives, the majority will also want:
- That a trustee is in place, in an independent position of the company issuing the offering, responsible for invoking the security and represent the interests of the investors if this would be necessary. The trustee normally holds a debenture of the assets of the company, for first charge on assets for investors.
- That a corporate or personal guarantee is issued, totalling a substantial amount in relation to the issued volume.
- That former issuances, if any, have been repaid.
- That the company pays sufficiently for the risk the investor's capital is exposed to.
There are several differences in how a debt-based offer, off openly traded markets, is distributed in Sweden and in a more internationally connected market. Some few providers in Sweden offer distribution of offerings, when the issued volume amounts to less than 400m SEK, directly to relatively large investor networks. Debt-based offerings distributed internationally are normally distributed by more than one company simultaneously, with each company possessing a less extensive investor network than Swedish providers, and with more than one offering in distribution at once. This, combined with the larger supply of debt-based offerings undoubtedly affects competition, which from time to time is noticeable in terms offered to investors.
The U.K is the most commonly featured origin of debt-based issuance offerings attracting global capital and has a domestic corporate market estimated to have been added over £11bn since 2011. The North American market is of greater extent but is domestically closed. Institutions, smaller institutions (such as family offices), companies and individuals are occurring as investors.
Student property as an asset
Every year, around £4bn is invested into new purpose built student accommodation in the U.K. About 30% of the stock are purchased by British investors, while approximately 70% of buyers are comprised of investors from remaining parts of the world. Since around 15 years ago, student property has grown to a popular asset among investors worldwide, equally larger institutions as individual investors. A couple of reasons making student property popular, are advantages in comparison to residential property, such as:
- Lower purchase prices than residential property and non-inclusion of stamp duty.
- A shortage of student accommodation in the U.K., parallell with a steadily increasing number of students.
- Usually higher percentual rental yield than residential property.
- Students may be referred to an accommodation from universities.
- When units are sold individually, there is normally a guarantee of rental income for a fixed number of years, issued by the property developer.
- One company often manages the administration of all units in a building which facilitates administration for owners.
Factors commonly mentioned as key features in a successful purchase include the location of the property, the management company of the building and the property developer.
Bammer are not solitary responsible for single offer issuances or distribution of offerings. Bammer does not make up a party in an agreement relating to subscription of an offer and hence does not constitute a risk factor for an investor. Bammer neither acts as a link or part in transaction of funds. Bammer is remunerated when an offer is subsriced via the service of the company. Bammer Sverige AB is since 2018 registered as a financial institute at Finansinspektionen (FSA).