City of London Group (COLG) announced that it has raised £15.2 million (just over $20 million USD) in new funding, which will be used to launch a bank that focuses on small and medium businesses (SMBs).
The finance services company raised £13.15 million through the issuing of new ordinary shares, while an additional £2.05 million was raised through the issuing of unlisted and unsecured convertible loan notes (CLNs). COLG explained that the CLNs carry a coupon of 6 percent interest per year, payable by the company twice a year for the previous six months.
"The CLNs — and at the holder’s option, any accrued interest — are convertible into new shares ... at any time ... at a conversion rate of one new share per £1.43 in outstanding CLN principal and interest," according to a press release.
The funding will help the launch a new financial institution called Recognise, with a focus on lending to SMBs. The bank will be launched by Recognise Financial Services, founded by Jason Oakley, the former managing director of Metro Bank’s commercial and mortgages lending business.
As part of the agreement, if Recognise does not receive a banking license by March 31, 2021, the CLNs will be redeemed by COLG for the then-outstanding principal amount, as well as any accrued interest. With this latest round of funding, Recognise will bolster its team and develop its operating model before the bank's official launch.
“We are delighted with the support shown by existing and new shareholders for our strategy," said Michael Goldstein, CEO of COLG. “Today’s announcement, and the commitments to raise in excess of £15 million, reflects confidence in the team and the strategy that we have laid down for creating an organization that is positioned to meet the needs of the [SMB] market. We continue to see a clear path for generating shareholder value.”