Direct lending fund sees largest loan enter administration

By Daniel Lanyon on Monday 7 January 2019

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The Hadrian's Wall Secured Investments trust has said that it will not impact returns.

The  £141m Hadrian's Wall Secured Investments trust has seen its largest loan enter administration.

An SME-focused direct lending portfolio aimed at mid-market loans, the investment trust launched in June 2016 initally raising £80m.

It lent £13m to Arensis Energy, which entered administration offically on 15 October, in the summer of 2018, representing 9.2 per cent of the fund as part of a hire purchase agreement.

Analysts at Liberum say the group is a wood pellet manufacturing business, representing 30 per cent of UK production. Hadrian's Wall is the senior creditor in the Group and has security over all of the assets, including manufacturing facilities and equipment.

“The administration has arisen as the Group experienced a working capital shortfall and did not have sufficient funds to complete capital improvement projects. These projects were expected to produce long-term inflation-linked income streams,” Liberum said.

Two new companies will split the group’s assets. One will acquire the English plant and the other will acquire the Scottish plant. Hadrian’s Wall says it will provide an additional £4m for working capital and capex purposes.

Liberum added that the investment adviser does not expect the administration will have a negative impact on the valuation of the investment and the fund’s board has decided not to put a loss reserve in place.  

“The decision not to apply any provision against the loan is surprising. Following the additional £4m loan, the exposure to the Group is c.12 per cent of NAV,” Liberum said.

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