The company created by fund manager Neil Woodford to receive tens of millions of pounds worth of dividends from Woodford Investment Management borrowed from HSBC Private Bank going back six years, FT Adviser can reveal.
Woodford Capital is an unlimited company and therefore does not have to file accounts but does have to provide Companies House with details of its shareholders and any charges outstanding against its assets.
The company is 65 per cent owned by Neil Woodford and 35 per cent by former Woodford Investment Management chief executive Craig Newman.
Documents filed at Companies House and examined by FT Adviser relating to Woodford Capital show this business borrowed an undisclosed amount from HSBC Private Bank in February 2017, with the bank receiving a charge over an asset owned by Woodford Capital.
The asset is described in the filing as “securities”, which is another term for shares, bonds or units in a fund.
The documents confirm the charge remains over the asset, and so its possible the loan has not been repaid, more than six years after it was taken out.
In the year to the end of March 2018, a financial period which began just one month after the loan was taken out, Woodford Capital received a dividend payment from Woodford Investment Management, the latter being the company which operated the Woodford fund business on a day-to-day basis, of £36.5mn.
A further £13.8mn was paid out in the in the year to the end of March 2019, which is the final year before the firm collapsed.
Despite these payments, the loan from HSBC may not have been repaid,, as the charge against the assets of Woodford Capital remains in place. The charge is against all current (if any) and future borrowings, rather than backing a specific loan.
When Woodford Capital was created in May 2016, it replaced a previous limited liability partnership company that had owned Woodford Investment Management.
At the time of its creation, Woodford Investment Management stated the cash going into Woodford Capital would have three purposes: to provide an income for Woodford and Newman, to make charitable contributors, to invest in the Woodford funds, and to be retained as cash for the benefit of the Woodford Investment Management business in future.
HSBC’s collateral for the loan is listed as “securities”, so this may be that the bank has, as collateral, units of the Woodford Equity Income fund, or other funds run by the company prior to its being dissolved.
One industry professional who is familiar with the Companies House documents, said it may be that Woodford and Newman, conscious of the long term returns that had been achieved by Woodford’s funds at Invesco, “thought it would be a clever thing to do to, say, borrow from the bank at 2 or 3 per cent a year, on the basis that the Woodford funds long-term track record to this point was a gain or maybe 8 per cent a year or more".
