Is the UK Bridging market still stable? Insights from Century Capital and MFS heading into Administration

With both Century Capital and Market Financial Solutions (MFS) entering into Administration recently, there has been a lot of speculation about the state of the UK Real Estate Bridging market. 

How much do we know about the Administration situation?

We don’t know much about Century Capital yet apart from that the website being down and it seems to be following a typical trajectory of a failed lender, which means there will be speculation. We’ll have  more details further down the process.

When you look more closely at MFS and their comments noted in multiple publications, Market Financial Solutions said: ‘the decision followed a temporary restriction on access to the company’s banking facilities, arising from a procedural matter with its primary banking provider’. There is perhaps more to this than meets the eye.

I’ve spent quite a few years in banking before moving over to the Advisory side., In my experience, abrupt issues with banking procedures are highly unusual and can often lead to speculation regarding the dichotomy between the strong financial position reported in the last accounts and the rapid onset of the Administration. Businesses with £71m revenue, £2.4bn lending book and £17m cash at Bank do not routinely have their facilities switched off for a procedural matter or paperwork issue.

What does going into Administration mean for borrowers?

Regardless of the reasons why (which will no doubt come out in due course and are speculated on elsewhere online), the real issues customers of MFS and Century Capital face now are:

1. New applications that haven’t drawn down will need to find a new home and quickly
2. Existing borrowers should be fine for the term of their loan, generally up to two years from drawdown, however they shouldn’t expect any leeway when their term is up and should start planning ahead accordingly
3. Multiple borrowers and complex cases (non-UK ownership, Trusts, PEPS, multiple properties on one loan, etc) will be most affected and should seek alternatives sooner rather than later

Even still, the market is holding steady

One point to reiterate is the UK Bridging Market is still in good health. Given MFS’ strong performance, it’s unlikely (but not impossible!) that the Administrators would start calling loans in when the MFS team clearly know how to manage their loan book, service their clients and get repaid. Add to this the short-term nature of the borrowing and that it is fully secured.

In theory it should be a gradual run down of the book without causing issues in the wider market place. If MFS was lending aggressively in terms of LTV or pricing, then placing the business elsewhere at the end of the term would ordinarily be difficult. However, even then bridging loans by their nature are short-term and borrowers require an exit strategy to be approved in the first instance.

What’s more likely to happen is the vast majority of borrowers will repay their loan when it falls due within the next two years and move to other providers for new loans. This can be the difficult part as the UK Bridging market has multiple competitive options and lenders shift appetite, pricing, LTVs and other parameters frequently to be competitive; a full market review is often not realistic for borrowers by themselves.

At Heligan Group, our Real Estate Advisory offering includes a specialism in bridging and short-term financing for cases requiring £5m-£150m of debt and, let’s face it, none of these cases are ever straight-forward. Our expert team has a combination of direct and industry lending experience, alongside Lead Advisory expertise, that can unlock even the most complex of cases.

If you’re uncertain about your latest short-term financing loans within the above debt requirements and would like some advice or just a chat, please contact our Real Estate team today.