On Monday, 15th February 15th the Financial Times reported that a SoftBank-backed lender had been hit with nearly £100m in defaults.
Co-Founded by Indian-origin entrepreneur Rishi Khosla, OakNorth, has reportedly incurred these defaults primarily as a result of soured loans to property developers. It was founded in September 2015 by Rishi Khosla and co-founder Joel Perlman after they sold their previous venture, which outsourced investment bank research to India, to the credit ratings giant Moody’s. The bank issues loans of up to £50m to businesses and property developers in the UK while also licensing its credit software to lenders in other countries. It has a sizeable back office in India that includes credit analysts.
The bank was previously belied to eschew traditional forms of collateral, but today the vast majority of its lending is secured against fixed assets including property.
According to analysis by the Financial Times, the defaults are largely made from just 10 borrowers with many following the coronavirus pandemic. But the paper examines that OakNorth’s biggest default to date was on £41m lent to a luxury property developer that went bust in 2019.
Rishi Khosla, the bank’s co-founder and chief executive, acknowledged that, at times, its default rates have been higher than some other UK speciality lenders but said OakNorth had fully recovered its debts on four of its 10 defaulted loans and expected recoveries of more than 90 per cent on the remaining six.
In his statement to the Financial Times, he said that 10 defaults over more than five years and around £5bn of lending “isn’t bad going”, adding: “I would argue that you probably couldn’t find a benchmark anywhere in financial services lending which actually compares against that.”
OakNorth said it continued to lend against “varied collateral” and to businesses without material tangible assets. The bank ended 2020 with an outstanding loan book of £3.5bn.
