How we work with clients

Helping a financial institution set-up a niche lending vehicle for multiple investors

A financial institution sought to enter the UK lending market targeting asset-rich but liquidity-constrained real estate holders. Without the need for a retail structure or requiring a banking license, the institution identified an opportunity in this niche segment.

Client’s Goals

• Set-up a structure to enable the pipeline of mezzanine lending opportunities to be funded and held for their lifetime in an appropriately regulated jurisdiction, and in an administratively efficient tax-neutral structure which works for the broad range of jurisdictions from which the investors hail.
• To have a robust vehicle capable of ramping up to an AUM of GBP 1bn over 10 years facilitating lending to the United States of America and the United Kingdom.
• The tax profile of the investment vehicle must be clear and certain for investors into the structure, offering investors the choice of a tax-deferred accumulation or accrued income for tax purposes.

Our Recommendations

• Establish a Luxembourg securitisation vehicle with multiple bankruptcy-remote compartments to enable the various deals to be segregated from each other.
• Utilise the domicile of Luxembourg to meet the needs of the financial institution and rely on the reputation of the jurisdiction to distribute the strategy widely to investors in various jurisdictions.
• Synchronise the Luxembourg Securitisation vehicle as a fully taxable company which can obtain a tax residency certificate, enabling access to the tax treaty network established by Luxembourg.

Outcomes (To Date)

• The vehicle has been established with 28 compartments and is lending to both the United Kingdom and the United States of America in a tax-neutral manner.
• The AUM is currently GBP 260m in UK lending opportunities alone.
• Stonehage Fleming Corporate Services Luxembourg S.A. provides the full range of required services for the structure, ensuring maximum Luxembourg economic substance.
• The UBOs of the structure have approached us for additional services in Corporate Services and Family office.

Disclaimer: Please note, all case studies have been carefully anonymised. Although scenarios are based on real life events they have been fictionalised and are an amalgamation of client experiences. All names, locations and occupations have been replaced with pseudonyms.