Amberside ALP – up to 5.5% p.a. fixed rate secured bonds
Update – 17 October 2019
This offer is now closed, whilst the manager develops its pipeline of lending opportunities.
These secured bonds offer the potential for regular income generated by loans to infrastructure projects.
- Fixed rate of up
to 5.5% p.a. – not guaranteed
- Choice of term – from flexible one-month access to fixed for three years
- Lending to fund
- Senior lending – first charge usually taken over the borrower’s assets and loans secured on borrowers’ predictable long-term cash flows
management team that has invested in – or advised on – infrastructure projects
worth close to £5.5 billion
- Zero loss record
to date, although past performance is not a guide to the future
investment of £10,000 for Wealth Club members
- Potential for tax-free income when investing though an ISA – please contact us for details
Watch a video interview with David Scrivens of Amberside Capital:
Attractive fixed rates
Lending to companies that carry out infrastructure projects has long been attractive to experienced investors. Not only do such companies tend to own significant assets, but they also have the potential for generating relatively predictable cash flow over a protracted period. Indeed, historically the recovery rate for project finance bank loans has been over 98% over a ten-year period.
Interest rates tend to reflect this and are usually lower than those available when lending to riskier projects.
These Amberside ALP bonds are an exception.
In our view they offer attractive high rates of interest in relation to the risk profile. The reason for this is simple: to incentivise investors to back the first bond offer from Amberside ALP. David Scrivens, co-founder of Amberside Capital, explains this clearly in his candid interview.
annual interest rate
|Matures January 2022||5.5%|
|Matures January 2021||4.5%|
|Flexible, one-month access||3.0%|
The rates assume interest is reinvested in the bonds. There is also the option to have interest paid twice yearly: different rates will apply, see the Information Memorandum for details.
Any interest you receive is normally subject to income tax. However, these bonds are also available through an ISA – technically, an Innovative Finance ISA (IFISA) – so any interest you receive could be tax free. You can subscribe to an IFISA alongside a Cash or Stocks & Shares ISA within the same tax year; please contact us for details. The maximum total investment across the different types of ISA is £20,000.
Please note, tax rules can change and tax benefits depend on circumstances.
How will the funds be used?
Amberside ALP aims to raise £30 million to be deployed into three to five opportunities. It is concentrating on a segment of the market which it believes to be currently underserved: projects below £20 million which are usually too small for banks and insurance companies’ project finance teams and too big for asset-backed lending providers.
The main requirement for a company to be considered is that it must be able to demonstrate long-term predictable cash flows.
An example is Amberside ALP's first project: a £17.5 million loan to build a large greenhouse in Suffolk. The 8.3-hectare facility will grow premium tomatoes hydroponically, i.e. without soil. Amberside ALP has the first charge over all the borrower’s assets, and the company is forecast to generate 50% more cash than is needed to service the debt in all periods.
Amberside is also likely to consider renewable energy projects, such as ground-mounted solar PV, biomass, anaerobic digestion, gas fired peaking plants and battery. Whilst the market for operational assets is buoyant and highly competitive, Amberside ALP sees an opportunity in projects in the construction and commissioning stages, where there is less competition.
Another sector targeted is waste management and effluent treatment. Its main attraction in Amberside ALP’s view is the long term contractual revenue streams with strong counterparties, often local authorities.
What protection do bond holders have?
Interest payments to bond holders are essentially funded through the borrowers’ loan repayments. So, one of the main risks is the borrowers being unable to repay the loans made to them by Amberside ALP.
This risk is somewhat mitigated – although not eliminated – by the stringent project selection process applied by Amberside ALP. It will concentrate on projects that have strong predicted cash flows from creditworthy counterparties and/or asset rich balance sheets and require contractual protections and security for the loans which it makes.
Additional protection is provided by Amberside ALP structure. 75% of all interest received from borrowers is paid into a reserve account from which withdrawals can only be made once the balance is at least 5% of the value of outstanding bonds. This reserve account will be used to fund bond interest payments in the event borrowers’ payments are delayed.
Similarly, Amberside ALP only uses half of any money invested through the Flexible Term (one-month access) bond, retaining the other half in a reserve account to fund requested redemptions. These reserve funds could provide an additional level of protection in the event of borrower defaults.
Please remember, though, this is still an investment, so returns are not guaranteed and capital is at risk. So, it should only be considered by experienced investors who can afford to potentially lose their money. The Bonds are not covered by the Financial Services Compensation Scheme. This is a non-readily realisable investment.
What experience does the manager have?
This is the first bond offer from Amberside ALP (Asset Lending Platform), which is a newly established company. However, the team behind it is very experienced in advising on or investing in infrastructure projects. The team has managed investments over £2 billion in infrastructure, solar, commercial property and UK asset-backed lending in the last 15 years.
Amberside Advisors has been mandated on close to £5 billion of infrastructure debt. CH-1 has invested £0.5 billion directly in infrastructure projects on behalf of high net worth investors. No matured debt investments made by CH-1 have so far suffered any loss of capital or interest to investors, although please remember past performance is not a guide to the future.
These bonds are illiquid and not readily realisable and should only be considered by experienced investors. Capital is at risk. You should not invest money you cannot afford to lose. The higher rates of the first series of these bonds reflect the fact that there is less diversification of loans as the Amberside asset lending platform gets underway.
The bond is not transferable and cannot be traded on any secondary market. The bond is not covered by the Financial Services Compensation Scheme.
Interest is paid net of 20% UK withholding tax (currently 20%), unless the bond is held in an ISA. Tax rules can change and tax benefits depend on circumstances.
Read more details on the risks in the Information Memorandum.
There is no initial charge and no other fees directly payable by investors.
Amberside ALP will receive fees from the borrowers. It will pay Wealth Club commission of 0.75% p.a. of out of these charges. For instance, the borrower will pay ALP an arrangement fee of 0% - 2.5% of the value of the loan. The borrower is also expected to pay for third party due diligence costs. The borrower will pay monitoring fees to Amberside ALP of up to £4,000 per month during construction and up to £25,000 per year post‑construction. Management fees will also apply. Please see the Information Memorandum for more details of the charges.
We believe these bonds currently offer an attractive rate considering the underlying loans will be made to companies with relatively predicable long-term cash flows.
Any future offers from Amberside ALP are likely to have lower rates as the portfolio becomes more diversified.
We believe the flexibility over the length of the term could be attractive to many investors. Note however, the rate is not guaranteed and capital is at risk.
Overall, we see this as a good fixed-rate investment opportunity for experienced investors, but you should form your own view.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
- Secured Bond
- Target raise
- £30 million
- Interest rate
- up to 5.5% p.a.
- Three years, two years, or one month notice
- Minimum investment