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Wed 15th Jun 2016 - Downing launches £3.74m secured crowdfunding bonds on Oakman pubs
Downing launches £3.74m secured crowdfunding bonds on Oakman pubs: Downing has launched a £3.74m crowdfunding bond that offers investors the chance to invest in Downoak, a group of four mature pubs operated by Oakman Pubs and Restaurants, offering 6.25% interest over a one year term. Downing provides security for bondholders by lending only to companies with existing operational assets and established revenue streams. The Downoak bond is one of four bonds being underwritten by Downing covering different sectors. Julia Groves, head of crowdfunding at Downing, said: “This type of investment-based crowdfunding is the right product at the right time and opens up the market to a new audience of investors. We are essentially offering attractive risk adjusted returns for investors and competitive finance for growing companies. There are also diversification benefits as these bonds are designed to provide fixed rate returns without exposure to the vagaries of the stock market, although, each bond carries general and specific risks.” Crowdfunding has become more popular over the past few years and Downing is developing debt-based crowdfunding by filling the void where traditional finance is not available and by applying the same level of due diligence to crowdfunded offers that it does in its normal venture capital business. As security trustee, Downing takes a legal charge over assets so in the event a borrower defaults on the loan, it has the right to step in to recover investors’ money. Downing’s annual monitoring fees are also contingent on investors’ cash and interest being paid in full. Steven Kenee, partner and head of licensed leisure at Downing, said: “We believe that crowdfunding is a particularly good fit for the pub sector; it works for companies as they gain customers and brand advocates as well as investors, and it works for investors as they like to invest in their own community through businesses they know and think they understand. However, there is a lot of mistrust of crowdfunding. Potential investors are nervous about a lack of due diligence on the companies raising funds and the absence of ongoing professional monitoring/oversight and companies are nervous about being associated with a market that they feel is open to abuse and the potentially negative impact on the business associated with a failed fund raise. DowningCrowd is designed to address all of these issues by applying the same level of due diligence to crowdfunded offers that it does in its normal venture capital business and by underwriting the fund raise so that operators are guaranteed to raise the funds they need.” Groves added: “We believe that applying years of experience to debt-based crowdfunding and offering both attractive risk adjusted returns to investors and competitive finance for growing businesses, provides a genuine win-win situation for all parties.” The first secured bond was launched in March this year by Downing and sold out in 13 days.


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