Emma-Jane Fulcher, founder of Grovewood Capital Consultancy, answers SCI's questions

Q: How and when did Grovewood Capital Consultancy become involved in the securitisation market?
A: I founded Grovewood Capital Consultancy at the end of last year (SCI 23 December 2019). In my previous role as head of structured finance at ARC Ratings, more and more clients were asking for structuring advice during the ratings process – which, of course, rating agencies are prohibited from providing. As such, there seemed to be a gap in the market for a firm with a ratings background to provide arranging and execution support.

At the same time, there is significant demand for private SME transactions, in listed or private placement form. Reverse enquiry activity has picked up over the last nine months or so, driven by investor appetite, due to the dearth of paper.

Securitisation can be an expensive option for SMEs, due to the number of counterparties involved, but it remains an efficient way of raising financing. Providing expenses are covered by the note issuance, it is possible to amortise the costs over the life of the deal. We can also save money by, for example, ensuring the documentation is correct before passing it on to legal.

Q: What are your key areas of focus today?
A: Our sweet spot is in deals sized at £10m-£100m in niche asset classes. They are typically five-year transactions via vehicles that can issue further series of notes when appropriate.

We’re seeing enquiries around property, bridging loans and consumer lending assets from the UK and Germany, as well as equipment leasing, receivables and sustainable energy infrastructure assets from the UAE. One is a Shariah-compliant portfolio, but the others will likely be issued under English law via Irish or Luxemburg SPVs.

For private deals, at a minimum there needs to be sufficient security to ensure robust cashflows and structural mechanisms – including strong DSCRs and reserves - to mitigate as much risk for investors as possible.

Q: Which opportunities do you anticipate in the future?
A: Online lenders are one area of opportunity in the private ABS space. Together with overcollateralisation and concentration risk mitigants, originators are putting up their own property or assets as a form of security to address concerns of heightened risks. They are more likely to repay if they have skin in the game.

Q: How do you differentiate yourself from your competitors?
A: We differentiate ourselves because of our solid credit background – and I know what works from a rating agency perspective. Thanks to post-crisis regulations, rating agencies can only say whether a transaction has passed or failed their requirements; they can’t provide any further detail. Rating agencies are increasingly moving into niche areas and we can replicate their models, so an issuer is confident upfront that its deal will pass.

A handful of smaller arrangers are active in the market, but they don’t always have the right expertise or are prescriptive about taking a transaction on over its entire lifecycle. We cover a whole spectrum of services – from structuring and arranging to administration – and can support an issuer on a bespoke basis.

Q: What is your strategy going forward?
A: We have a strong pipeline and hope to add another couple of ex-rating agency staffers by the summer.

Corinne Smith