West Ham Mini Bond partner Basset & Gold...it gets worse and worse

I am delight to see that a mere 26 days after we exposed the looming scandal involving my beloved West Ham United and its mini bond short sponsor Basset & Gold, that the deadwood press ( The Sunday Telegraph) has picked up on the matter. As ever the MSM well on the ball, what a suprise that newspaper sales are tanking. But the story gets worse as I can now reveal....

Basset & Gold, official shirt sleeve sponsors to the mighty Irons, has just published its accounts for the year ended 30 September 2018. Basset managed to attract further mini bond investors and now owes £29.69 million to investors (up from £13.03 million) no doubt attracted by loans offering up to 8.15 per annum for five year loans. The Directors report indicates that demand for bonds remains strong.

Basset & Gold reported a profit of £110,395 which increased net assets to £233,784. However, that represents a solvency margin of only 0.75% versus gross assets so virtually no safety margin for mini bond investors should the underlying loan underperform. The company states that it incurred administrative expenses of only £381,077 which is modest versus excesses of some of mini bond lenders but you do wonder where the cost of the team shirt sponsorship, which can’t be cheap, has been charged and remember that this company boasts of having 30 employees in its promo videos.

Of its assets some £28.77 million or 95% has been lent to River Bloom UK Services Limited. No details are provided about the interest rate on the loan nor any details about the company such as its assets. The last filed accounts of River Bloom UK Services Limited for the year ended 31 December 2017 showed cash of £5,000, current liabilities of £6,241 resulting in net liabilities of £1,241. The auditor’s report contains an emphasis of matter around the investment:

“Emphasis of matter

In forming our opinion, which is unmodified, on the financial statements we draw attention to Note 12 to the financial statements. The Investment comprises almost entirely of loans to River Bloom UK Services Limited, an associated company registered in England. The valuation and recoverability of this loan from River Bloom UK Services Limited is dependent on the financial strength of the counter party to whom it advances investments. Whilst the management
accounts of River Bloom UK Services Limited show a neutral position, the directors of Basset & Gold Pie have carried out a thorough impairment review of the profitability, solvency, liquidity, forecasts as well as a review of the unqualified audited accounts of the counter party of River Bloom UK Services Ltd and are satisfied that counter party maintains its ability to service the facility and repay investments to River Bloom UK services Limited.”

So the auditors indicate that the mini bond lenders are effectively lending money via River Bloom UK Services to an unnamed counterparty for which no information is provided in the accounts.

The company discloses that “While the company itself is not an FCA authorised entity, it does rely on a FCA authorised firm (B&G Finance Limited) to help clients find safe homes for their savings.” B&G Finance is controlled by the same individual that controls Bassett and Gold so there is effectively no independent oversight. The FCA approved B&G Finance to market bonds on 2 January 2018 replacing the previous regulated entity whose directors resigned from the Board of Bassett & Gold in the prior period for unspecified reasons.

You do wonder what the FCA is thinking when it authorises companies such as B&G Finance to promote bond issuances by an effective sister company, when the previous authorised FCA entity decided to cease to act. By now it must be clear to the FCA that a lot of unsophisticated investors simply don’t understand the subtle distinction of the bond prospectus having to be FCA approved but the underlying bonds not benefiting from protection. Surely it’s time for the FCA to step up and protect investors before the next London & Capital Finance crash occurs rather than simply conducting another post mortem over what it missed after the event.

It spends lots of time and effort ensuring that consumers don’t over pay for car, home and other general insurance products where the loss amounts to a hundred pounds or so at most and fails to act leaving vulnerable pensioners and others losing life changing sums of cash.