By Tom Winnifrith | Tuesday 2 April 2019
After the collapse of the London & Capital Finance ponzi, I wonder about some of the other high yield mini bonds being pushed to investors. And thus my attention is drawn to Basset & Gold PLC whose products are being promoted by my beloved West Ham United and some of its players.
This lender features prominently on web sites offering high interest rates offering up to 45.04% total return for a 5 year compounding high yield bond. It also states that it is proud to sponsor West Ham United Football Club and features a video with some West Ham players in the dressing room talking about the opportunity which concludes with
the attractive promoter driving away in flash car.
The marketing blurb on the web site to reassure investors includes reassuring statements such as: “What’s my security?
Loans are backed by assets, such as corporate debentures, property and other forms of security in order to protect our investments and your capital. For example, if we advance cash to a borrower, we will check that its assets (including the book value of any underlying on-lending by the borrower) exceed the total value of money borrowed.”
The company has net assets of only £123,389 and has raised cash of £12,883,556 from its bondholders comprising bonds payable within one year of £4,950,100 and £7,933,456 due after more than one year.
Its entire “investment of £11,935,199 represents series of loans to River Bloom Ltd, an associated special purpose vehicle company domiciled in Cyprus.” The balance of the monies raised has been lent to other group companies.
Does that mean that almost £1 million of money invested by biondholders has gone on marketing costs, admin costs and sponsoring the mighty Hammers? I rather fear that it has and that means that the loans made by Bassett will have to generate a bumper return if they are to both return all the capital and pay the coupon as well as covering the aforementioned costs.
Worryingly for Bondholders Basset’s auditor’s state in an emphasis of matter paragraph within its audit opinion concerning the amounts due from River Bloom the following:
“In forming our opinion, which is unmodified, on the financial statements we draw attention to Note 11 to the financial statements. The Investment comprises entirely of loans to River Bloom Ltd, an associated special purpose vehicle company domiciled in Cyprus. The valuation and recoverability of this loan from River Bloom Ltd is predicated on its financial strength. While the co-terminous audited financial statements of this entity are not available, the directors of Basset & Gold Plc have carried out a thorough impairment review of its profitability, solvency and liquidity and are satisfied it maintains its ability to service the facility.”
So the auditors don’t appear to have seen the accounts from the borrower so how did they assess the validity of the directors’ statement as auditing standards require them to do that loans are recoverable?
The FCA are partly responsible for the problem because they have authorised a fellow company in
the group to promote these bonds.
“The bonds are promoted to the public and corporate investors by Basset Gold Ltd, operating as an appointed representative of an FCA authorised entity. The company is pleased to announce that after the year-end, an associate company, B&G Finance Ltd, btained its own FCA authorisation and is now responsible for the promotion of the bonds.”
The less financial sophisticated punter sees FCA approved for the prospectus, dreams about blowing bubbles, does not worry about the auditors warning and lowers their guard. Surely it is time for the FCA to step and use some of its vast resources to subject schemes such as this one to real scrutiny.
To have one LCF type accident might be understandable but two would look like carelessness.
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