Iwoca Tetra Limited

The Company was established as a special purpose vehicle (“SPV”) to act as a provider of finance to its parent company, iwoca Limited (together with its subsidiaries, the “Group” or “iwoca”), through the structured acquisition and sale of unsecured business loan portfolios to SMEs (the “Loans”) from iwoca Limited (the “Originator” and the “Seller”). On 16 October 2024, the Company acquired an initial portfolio of Loans from the Seller and has continued to acquire further Loans both throughout the period and after the period end. The Company is funded through facilities from third parties (the “Senior Loan Note” and “Mezzanine Loan Note”) and through a subordinated loan from the Originator (the “Subordinated Loan”) (together the “Loan Notes”). The Loan Notes have a two year availability period which expires on 3 October 2026. The Senior Loan Note has a maximum facility limit of £160,000,000 and has a maturity date of 3 April 2032. The Mezzanine Loan Note has a maximum facility limit of £30,000,000 and has a maturity date of 3 April 2032. The Subordinated Loan has a maturity date of 3 April 2032. The Loan Notes are drawn down as required in order to fund Loan acquisitions. The Loan Notes are a limited recourse obligation of Company, secured over the Loans, and the Company’s ability to pay amounts due on the Loan Notes are, in substance, limited to the application of the receipts from the Loans under the terms of the priority of payments. The activities of the Company were conducted primarily by reference to a series of transaction documents (the “Transaction Documents”). Under the terms the Transaction Documents, the Seller has the right to receive deferred purchase consideration on a monthly basis from the residual funds in the priority of payments to the extent the funds are available after all other obligations. The Directors of the Company have concluded that the risks and rewards of ownership of the Loans substantially remain with the Seller due to the credit enhancements provided by the Seller in the form of the Subordinated Loan and the entitlement to the residual funds. As a result, in the Seller’s financial statements the transfer of ownership of the beneficial interest in the Loans fails the derecognition criteria of IAS 39 Financial Instruments: Recognition and Measurement and the transfer is instead accounted for as a financing transaction. The Directors of the Company have concluded that it is appropriate to also account for the beneficial interest acquired in the Loans in the same way. Therefore, the Company has not recognised the Loans in the balance sheet and instead recognises a receivable to the Seller (the “Deemed Loan”). As at the financial period end, the total outstanding balance of the Deemed Loan issued by the Company to the Seller amounted to £53,131,508. The UK has continued to face significant economic uncertainty, with this uncertainty being greater than historical levels. Whilst inflation and the Bank of England base rate have both reduced in 2024, this contrasts with factors such as elevated energy prices – triggered in large part by the ongoing Russia-Ukraine war, ongoing global supply chain bottlenecks, increased geopolitical tensions in the Middle East and uncertainty over international trade and tariffs, all of which still remain potential threats to the UK economy. While the extent and duration of the effect of this economic uncertainty remains unclear, there is a risk of financial instability for the Company, for example a detrimental effect on the UK economy may ultimately impact the borrowers’ ability to repay the Loan Notes. However, as at the report date there has been no material impact from these macroeconomic factors on the Company’s financial performance or cash flows. As the Loan Notes are limited recourse obligations of the Company, the Company is not ultimately exposed to losses if the borrowers are unable to repay the Loan Notes. The Directors envisage no changes to the nature of the Company’s business in the foreseeable future.