AIM-listed Orchard Funding Group, a speciality finance company, is looking to raise up to £20 million, including retained bonds, via a bond that is unusual for several reasons.
The 6.25% bonds due 2027, issued by Orchard Bond Finance, represent the first UK retail bond since November 2021 and the first UK retail bond from a business with listed equity in over two years. The bonds are also notable for being made available to retail and institutional investors.
The deal represents Orchard’s debut corporate bond as it seeks to diversify its funding. It has also noted that longer-dated capital represents a better match for its growing loan book. The lead manager of the deal is Convexity Capital.
Orchard Funding Group has been trading since 2002 and listed on AIM in 2015. The group has historically been active in the insurance premium finance market, the professional fee funding market and, more recently, other specialist lending markets including static caravan site fee lending, static caravan lending and property finance lending.
Since its establishment in 2002, it has lent over £683 million and between FY2016 to FY2021 the total principal amount of loans provided by the Group was c. £383 million. The lending volume for the most recent complete full year (to 31 July 2021) was c. £61 million, compared with c. £65 million in the previous year. The fall was attributed to the impact of COVID-19.
In 2015, in connection with its admission to AIM, the Company raised £10 million (before expenses), the net proceeds of which were used to provide capital for lending to its clients and to optimise the Group’s existing capital structure through the repayment of a c.£5.0m debt facility. The Company admitted was to AIM on 1 July 2015. The Group’s current finance facilities, amounting to £20 million in total, are provided by Natwest and Toyota Financial Services.
Ravi Takhar, Chief Executive of Orchard, said:
“Orchard has experienced sustained growth since its commenced trading in 2002 and especially since the business was listed in 2015. We have lent over £683 million and we have the support of Natwest and Toyota Financial Services, who are supporting our established lending and new product lines. In order to diversify both our sources of capital and our product breadth, I am delighted to be launching what I hope will be the first of our corporate bonds on the London Stock Exchange. When these bonds are free to trade, investors will have the option to invest in both the equity and debt of our business.”
Michael Smith, Convexity Capital, said:
“Convexity is pleased to be launching this debut bond for Orchard Bond Finance PLC. I have arranged many successful retail bonds since the market opened in 2011 and it’s great to see this listed company launch this bond. Orchard’s debut bond is an important step for the business: it augments the Company’s existing banking lines, provides diversification and importantly, it’s longer-dated capital. This bond is also important for the wider UK capital markets as we move into post-Brexit world. It’s important that businesses of all sizes have access to the capital markets to facilitate growth – and there is nowhere more appropriate for a UK listed business to raise listed debt than on the London Stock Exchange.”