UK Businesses Offered Access To GBP1bn Loan Fund

Fri, 17 Jul 2009

M&G, the asset management business of financial services giant Prudential, is to offer £1 billion worth of loans to British companies suffering from the tough economic environment.

The UK Companies Financing Fund will enable pension funds and other institutions to lend directly to medium-sized businesses in the UK.

The companies will be offered loans in the form of a bond with a minimum term of five years and in return, investors will receive an "attractive rate of interest", which M&G said would come with a premium compared to loans provided by banks .

M&G has £134.6 billion under management and plans to raise a further £1 billion from investors for the fund .

Local authority and private sector pension schemes have already committed money to the fund, with £500 million coming from Prudential's life fund .

Bernard Abrahamsen, director of fixed income at M&G, said the fund could also be used by businesses to refinance existing loan facilities, but added it would not provide a bail-out for struggling firms.

He commented: "There is very definite need for such funds like this and we are in discussions with several borrowers at the moment."

"We will be selecting stable solvent companies with financing needs who have struggled to get loans from banks ."

"This represents a good opportunity for businesses and will prevent them from having to explore other routes like rights issues."

Chancellor Alistair Darling welcomed the fund, describing it as "a useful step in the right direction".
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