A leading peer-to-peer lender has abandoned a fundraising intended to recapitalise it after an auditor’s warning over the state of its finances.
Wellesley, which owes tens of millions of pounds to retail investors, scrapped the crowdfunding round amid a lack of demand.
Yesterday Wellesley tried to reassure its backers that it was in a stable position even without the additional funds — this despite a warning in the company’s latest accounts from BDO, its auditor, that the business was “dependent on raising further capital to continue to operate for 12 months”.
The lender was trying to secure £1.5 million via Seedrs, but it terminated the fundraising after receiving pledges worth less than £200,000.
Alasdair Lenman, Wellesley’s chief financial officer, said that the business did not need the money to survive. He said that a cost-cutting programme at the end of last year, which included several redundancies, and a more cautious approach to growth and credit risk meant that BDO’s warning no longer applied.
Advertisement
“The business has a higher capital base and a lower risk profile than when the auditors made their comments, so we are confident we can grow the business without raising external equity,” he said.
Wellesley, which is run by Graham Wellesley, 8th Earl Cowley, has funded £366 million of property loans. It owes about £40 million to approximately 1,500 holders of “mini bonds” that it issued. Unlike investors in its secured peer-to-peer loans, holders of these unsecured instruments would be directly at risk of losing their investment in the event of Wellesley’s failure.
The mini bonds provide working capital for Wellesley’s lending operation and have proved contentious in the multibillion-pound peer-to-peer lending industry. It has emerged that Wellesley left the industry’s trade body, the Peer-to-Peer Finance Association, in 2014 after a row over the appropriateness of mini bonds, which have a minimum investment of £100.
Wellesley noted that none of its investors had ever lost money.
Mr Lenman said that there had been no rush from investors to withdraw from Wellesley after speculation over its finances in recent weeks, insisting that the fallout was “limited”. He said the company was unlikely to attempt to raise external finance in the immediate future.
Advertisement
He added: “The only thing that we need to do to be profitable is slow our growth down and keep impairment costs at the low levels we’ve been experiencing. That is what we have done.”