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Wellesley Finance makes loans solely to businesses (these business loans include but are not limited to business development finance, business buy-to-let, and first/second charge loans for business purposes). As a result, these loans do not have the benefit of the protection and remedies that would be available to you as a consumer in the context of a non-business loan. Wellesley Finance is not permitted to undertake retail loans to consumers. If you are a retail consumer seeking a non-business loan, you should not seek to obtain a loan from us. Business loans will be secured on relevant assets and these assets are at risk in the event of the loan being in default. A property asset may be repossessed if repayments are not kept up on a loan or other asset secured on it. If you need advice on any of these matters, or you are in any doubt as to the consequences of taking out a loan with Wellesley Finance (including not being regulated), you should seek independent advice from an appropriately qualified professional. Wellesley Finance recommends that you consider whether a potential business loan meets your own creditworthiness, risk levels and objectives. You should be seeking to borrow funds only if you believe that your business activities are capable of repaying those funds and that you have considered the required repayments in relation to your other financial commitments.

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Stephen Bell, our Chief Risk Officer, has provided an update on the loan book performance

May 26, 2017

"The Wellesley loan book continues to evolve and now stands at 65 loans with combined committed facilities of £271m. During 2016 the drawn balanced increased by 10% to £163.6m which was made up of new loans and additional drawdowns on existing loans of £118.6m.

Since the firm’s inception it has supported the development of over 2,000 houses of which 822 relate to activities in 2016. The significant majority of these are homes valued below £250,000 with only 20% being worth more than £500,000.

Major Case Update
Regarding the three cases I referred to in February;
Case 1 – This was a £3.1m loan to develop 5 houses. Poor construction management, cost overruns and delays ultimately meant the project became unviable in its original form.
Update: Having stepped in the construction phase is going well with 2 of the 5 units completed and one under offer.

Case 2 – This loan totalled £5.3m relating to four properties. Health and safety issues occurred on site which resulted in construction delays.
Update: Having sold properties at a loss which has been written off, Wellesley is progressing recovery proceedings.

Case 3 – This was a £1.7m loan to develop one high-value single property. Complications arose from planning irregularities and ineffective cost control.
Update: Having sold the property at a loss that has been written off, Wellesley is progressing recovery proceedings.

Extension Risk
Of the 125 loans originated since the start of 2015, 20 (16%) are beyond the original term. This is within the firm’s expectations. In the previous review, I detailed how with development finance, a project taking longer to complete than its original contractual duration is not uncommon. When a loan is expired, it does not specifically indicate that there will be a loss and it should be noted that the expiry does not affect the security that we hold over the property.

Overall Provision Position
We started 2016 with a provision stock of £3.4m. After write offs of £2.3m in relation to Cases 2 & 3 above and a net increase of £0.8m in the year the provision stock at year end 2016 was £1.9m.

The net increase reflected additional provisions of £1.3m against 5 facilities offset by a partial release (£470,000) of the provision against Case 1 as a result of our decision to build out the scheme.

May Review
The most recent review completed in May for the Wellesley Group Investors Ltd Board confirmed we believe that remaining future expected losses will fall within the provision stock. This positive trajectory is evidenced by lifetime losses as a percentage of lifetime lending now being 1% - reported at 1.2% at the last year end”.


Stephen Bell, Chief Risk Officer