Prospect Capital Co-Lending Brochure 2021

․ PROSPECT CAPITAL ⭢ Co-lending Proposition

․ PROSPECT CAPITAL ⭢ Structured Finance 2020

Provides strong and fully secured returns on capital

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⭢ Co-Lending Proposition

About us Prospect Capital has built an excellent reputation for ethical, responsible lending in the specialist finance and bridging market.

Our ongoing success from strong deal origination coupled with high quality underwriting, has created the opportunity for new co-lenders to join our existing co-lenders who enjoy excellent returns through participating in short term loans that are fully secured against UK or Jersey property assets.

Through our straightforward and transparent approach, we seek to forge long term relationships with all our co-lenders who include high net worth individuals, private clients, family offices and institutions.

Our co-lending proposition Prospect Capital provides attractive and secured returns for its co-lending partners, significantly derisking their position by supporting each loan with its own capital.

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Prospect Capital’s co-lending programme provides an opportunity to participate in loans with your money fully secured through a first charge on a property asset.

Our co-lenders collectively provide a pre-agreed portion of a specific loan, and we provide the balance.

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In all circumstances our loan will subordinate to yours, therefore, we must lose our entire capital before any of your loan is exposed.

• PROSPECT CAPITAL

How it works Prospect Capital will originate, underwrite, and manage all loans thereby providing you with a secure income without any of the work involved.

Any loan we are considering will be subjected to an initial screening process. If it passes this initial screening, we will issue the borrower with an agreement in principle. It is important to note that this is subject to underwriting and approval by our credit committee.

At this stage we will also send all our co-lenders an overview of the loan in the form of a co-lending proposal (CLP). This provides details of the loan together with a clear statement of the interest rate payable and the colenders combined maximum LTV, which is usually 55% or less. Any co-lender who wishes to participate in the loan simply informs us of the amount they wish to provide, the minimum amount is usually £100,000.

Once a loan has been through our underwriting process and subject to it being approved by the Prospect Capital credit committee, a lawyer from our panel will be instructed to commence with the loan and security legal documentation.

Once the legal work has been completed, the lawyers will report back to both Prospect Capital and each co-lender individually. Both Prospect Capital and the co-lender send their portion of the loan directly to the lawyers shortly before completion is due.

In certain circumstances we may fully fund a loan ourselves initially then offer it to our co-lenders post completion.

Committed facility We can also offer a committed facility, whereby a co-lender guarantees to make a certain amount of funding available for Prospect Capital to drawdown at its sole discretion, subject to meeting certain pre-agreed criteria such as maximum LTV, interest rate payable, maximum amount per loan etc. ⭢ 03

In return for this committed facility being provided, Prospect Capital agree to pay a minimum annual return on the entire funding made available whether it is used or not. For further information on this, please contact us.

⭢ Co-Lending Proposition

Security All loans ․are secured by way of a first legal charge over one or more property assets. The responsibility for perfecting the security rests with an independent team of external lawyers who are appointed to act jointly for Prospect Capital and our co-lenders. The legal charge is held by our security trustee company, more details of which are provided below.

Prospect Capital continues to monitor and manage the loan throughout its term. This includes regular audits by a specialist team within Prospect Capital.

The results of these are issued to our co-lenders periodically and include a loan dashboard report.

In the rare event of a loan default and therefore termination of a facility, Prospect Capital will enforce the security and sell the asset, if that is what is required to ensure payment of the loan. In the unlikely event of a shortfall post recovery, Prospect Capital will carry all losses until its portion of the loan has been eroded in its entirety. Only in this event will our co-lender risk any erosion of their capital. These combined factors result in an extremely low risk environment for the co-lender.

Security trustee structure overview Using a dedicated security trustee company to hold the first legal charge over a property, where more than one lender is participating in a loan, is both good practice and a well proven arrangement that has many benefits for all concerned. More information on the benefits of this arrangement are outlined below, but first how does it work?

Prospect Capital Security Trustees Ltd (PCST), is a UK registered company that exists purely to hold the first legal charge on behalf of all participants in a loan.

The company never has and never will trade as it exists purely to fulfil the role of security trustee on behalf of all lenders, including Prospect Capital Ltd. ⭢

On completion of each loan a first legal charge is registered in the name of PCST (instead of each individual lender) which is held by it on behalf of all lenders.

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Prior to completion a deed of priority is signed by Prospect Capital Ltd which clearly states that Prospect Capital Ltd is subordinating to the other lenders who all sit pari passu with each other. This is the case if the loan involves one or more co-lenders. All co-lenders therefore effectively share a joint first charge with Prospect Capital sitting behind them.

• PROSPECT CAPITAL

Benefits provided by a Security Trustee Arrangement ⭢

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There is only one legal charge to be registered at the land registry which is both swift and simple. This reduces the paperwork and workload for all co-lend partners whilst affording them the same level of security and protection.

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There is far less paperwork to co-ordinate and sign between all lenders prior to completion, which makes the legal process more efficient and expedient. This prevents undue delays and stress among both the lenders and borrower which can also be highly problematical when the loan is to fund a purchase and therefore involves a contractual commitment with a fixed deadline.

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If a co-lender is unavailable due to illness, holidays or simply other commitments, matters can be dealt with on their behalf, with of course their prior written approval.

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If a co-lender wishes to have their loan participation, in full or part, returned prior to the loan being repaid we can simply switch their position with another lender, subject to prior agreement. This can be effected swiftly without the need to involve the work and expense of changes to the legal documentation and registered legal charges.

It also removes the uncertainty of the borrower’s co-operation which may or may not be forthcoming.

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⭢ Co-Lending Proposition

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A security trustee arrangement also has the advantage of directing the borrower to deal with one entity when managing their relationship under the security documents and saves other lenders the corresponding time and inconvenience.

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The security trustee, through the trust structure, will owe certain additional obligations or duties to its beneficiaries, being the individual lenders. Since the security trustee sits between the borrower and the lenders, the security trustee provides an additional layer of protection for the lenders that they would not get if they held the security directly.

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The security trustee structure provides the co-lender with complete anonymity.

⭣ Whilst the above makes reference to UK lending, the same procedure applies to loans granted in Jersey.

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To date no Prospect Capital co-lender has ever lost any capital or interest on their loan.

• PROSPECT CAPITAL

Loan Examples ⭢ Prospect Capital funded the completion and exit of an existing residential period house development, in Wimbledon. This loan was to replace a conventional development facility and provide additional funds to complete the development which included the final finishing touches to the site such as landscaping and to provide time for the properties to sell following completion of the development. ⭣

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Asset value

£7,600,000

Advance £4,830,724

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Security

1st charge, share charge,

debenture, personal guarantee

Loan provided by PCL

£2,830,724

Loan provided by co–lender

£2,000,000

Co–lender LTV

26%

Co–lender interest rate

7%

Term

12 months

⭢ Prospect Capital was pleased to fund the purchase of a substantial site in Kent. The main residence is a nine-bedroom residential property, recently refurbished to a high standard. The site also comprises a six-bedroom house, two four-bedroom cottages, two three-bedroom cottages, ancillary buildings and equestrian buildings including 39 boxes, fenced paddocks and woodland, set within approximately 108 acres.

On completion of the purchase, the couple intended to split the title for all individual properties. Once the titles were split the properties were marketed for rent. The clients retained the main principal residence and once Prospect Capital were redeemed, they were able to move their family into the property. ⭣

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Asset value

£5,000,000

Advance £2,017,095 ⭢ 07

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Security

1st charge, share charge,

debenture, personal guarantee

Loan provided by PCL

£547,095

Loan provided by co–lender

£1,470,000

Co–lender LTV

29%

Co–lender interest rate

9%

Term

12 months

⭢ Co-Lending Proposition

⭢ Prospect Capital assisted with the purchase of an apartment just off Kensington High Street, conveniently located for the West End and central London. Prospect Capital also worked with the overseas client to refinance his UK portfolio. ⭣

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Asset value

£1,350,000

Advance £650,000

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Security

1st charge, share charge,

debenture, personal guarantee

Loan provided by PCL

£150,000

Loan provided by co–lender

£500,000

Co–lender LTV

38%

Co–lender interest rate

7%

Term

9 months

⭢ Prospect Capital were pleased to assist with the acquisition of a residential property on the south side of Grosvenor Street in Mayfair. The clients, an overseas family office with an existing UK property portfolio, had a strong track record of developing assets in this sector. Subject to planning, Prospect Capital agreed to provide a development facility to further enhance the property. ⭣

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Asset value

£7,000,000

Advance £4,000,000

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Security

1st charge, share charge,

debenture, personal guarantee

Loan provided by PCL

£500,000

Loan provided by co–lender

£3,500,000

Co–lender LTV

50%

Co-lender interest rate

8%

Term

12 months

⭢ Prospect Capital assisted with the acquisition of a beautiful property in St Brelade, Jersey with one of the best 180-degree sea views on the island. The client worked with the local planning department and architects to obtain consent for a new home on the site of 8,000 sq. ft. The plot could comfortably accommodate a larger home, therefore additional planning was sought to increase the size to 12,000 sq. ft, thereby increasing the GDV to £12m.

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Asset value

£5,450,000

Advance £3,500,000

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Security

1st charge

Loan provided by PCL

£550,000

Loan provided by co–lender

£2,950,000

Co–lender LTV

54%

Co–lender interest rate

7.5%

Term

15 months

Contact us ⭣

Prospect Capital Ltd Floor 1 Liberation Station St Helier Jersey JE2 3AS prospectcapital.je info@prospectcapital.je +44 (0)1534 710946

This product is not regulated by the Jersey Financial Services Commission and is subject to terms and conditions.

If you are in any doubt about the consequences of using this product you should take advice from a lawyer, specialist or appropriately qualified advisor first. © Copyright Prospect Capital