Ambitious
bond issues present new way of raising funds, reports Claire
Hack.
Go deeper with GlobalData
Southern Finance has ambitious plans to
expand its motor finance business and also move into the consumer
lending market following its acquisition by sister company R
Raphael & Sons (Raphaels Bank).
Now run by Raphaels, which has bought 100% of share
capital, Southern plans first to expand within the motor finance
industry and then launch a new consumer business focused initially
on the second mortgage finance sector.
The company’s acquisition follows the departure of
major banking players in the consumer sector, and takes place in
the wake of a “huge level” of consolidation within motor finance,
according to Raphaels CEO Miles Roberts.
Roberts added: “A number of major banks that make
up the wholesale funding arena have pulled out of wholesale funding
for consumer lending.
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By GlobalData“The Raphaels Bank acquisition has happened to
raise funding through retail bonds, rather than through the
traditional wholesale funding.”
This means Southern Finance will be relatively
unique in the UK market in that it will be funded by bond
issues.
The date of maturity of bonds varies between 6, 9
and 12 months, with the average coupon standing at 3.75% at the
time of acquisition.
Roberts said: “They have a fixed period and they
are held by the general public.”
Southern, which has been in operation for the last
57 years, became part of the Lenlyn Group in 2005, where previously
it was privately owned. Lenlyn is also the exclusive owner of
Raphaels.
The lessor currently deals with about 20,000
customers, privately and commercially, and Raphaels is hoping to
expand on this number.
“We are looking to expand the Southern Finance
brand with strategic alliances with other lenders and strategic
alliances in motor finance,” Roberts said.
Roberts added that Southern will be both lending
direct and brokering finance with a number of other finance
providers.
The aim is to provide motor dealers with “a more
flexible choice”, offering finance options including personal
contract purchase, leasing and lease purchase.
Roberts joined Southern Finance as managing
director in 2005 and remained in the post until 2009, when he was
appointed CEO of Raphaels.
He is now to become more involved in the Southern
Finance business again, as it becomes a division of the bank,
although he will remain in his position as CEO of Raphaels.
Roberts said: “As CEO, I am looking after strategic
growth and the direction of the bank’s divisions – one of those
divisions will be Southern.”
He added that Southern is no longer “the same
company” following the acquisition, which took place in March this
year.
“We will be maintaining the trading style of
Southern but it is not the same company – we have taken the
opportunity to take up a good business model and expand upon it,”
Roberts said.
“It will still be dealing in a very old-fashioned,
service orientated way, on the values we still think are
required.”
Plans are also on the cards to move into the north
of England, as well as to extend product lines and move into new
markets.
Roberts has worked in motor finance for more than
20 years, beginning his career in the sector with Lombard North
Central.
He then moved to Singer & Friedlander Finance
as sales director when it was founded and stayed for about 15
years, before joining Southern Finance in 2005.
Lenlyn, which is now owned by four brothers,
has been trading for 30 years and its principle business is in
bureaux de changes.
