Future Finance Loan Corporation, a Dublin-based financial technology company that raised $485m (€450m) over the past decade on a mix of debt and equity, has stopped lending and gone into voluntary liquidation in a bid to recoup values for shareholders.
The firm, which issued mid-sized student loans mainly to UK borrowers starting in 2013, began the process of an orderly solvent liquidation on 12 January.
A combination of rapid cash burn, rising loan losses and an unfavorable interest rate environment appears to have stalled the growth plans of the once-ambitious firm co-founded by Brian Norton.
Future Finance stopped writing new business last year and transferred its £65m loan book to Asset Linked Capital, a Jersey-based debt collection agency and loan administrator. The terms of the agreement have not been made public.
The most recently filed accounts, from 2021, show losses of £6.6m which almost cancel out net interest income of £6.8m. The directors also gave a gloomy assessment of the UK’s economic outlook, with high inflation, rising interest rates and potential unemployment pointing to more bad debt in the future.
The company also surrendered its operating license from the Central Bank of Ireland last year, putting an end to its long-standing ambition to expand its lending business here.
The business’s fate was sealed last March when the sole remaining shareholder, a New York-based family office called KCK, said it was no longer willing to invest on the basis of projected future returns.
After taking in just over €111 million in equity from KCK, Blackstone and several venture capital investors to build the lending platform, the focus shifted to “unleashing value in the business back to shareholders”.
CEO Jeff Jackson was ousted in April and replaced by KCK CEO Tony Ettinger to oversee preparations for a quick asset sale or a multi-year salvage operation.
KCK, which had effectively taken over the business in December 2021 via a £10m Series E equity raise, put in a further £1.5m early last year to help fund ongoing operations, while Future Finance cut its workforce by more than half to just 31 employees.
Previous investors, such as S-Cubed and Fenway Summer Ventures, were squeezed out. Future Finance also began repaying debt and canceling its outstanding credit facilities.
Ettinger did not respond to requests for comments sent directly and via KCK.
The problem appeared to begin during the first year of the pandemic, when a five-year £100m loan set up in December 2017 was called early, in October 2020.
Impairment losses topped £12m that year, or about 16 per cent of the outstanding loan value.
In the main, losses on lending and investment costs were higher than the available share capital’s ability to absorb them.
With a narrow book of 13,000 loans, with an average face value of £5,000, issued in a single jurisdiction, the concentration of risk was high. And as interest rates rose rapidly, no more funding was forthcoming for expansion and diversification.
