In October 2022, ASK and OakNorth Bank announced a corporate transaction whereby OakNorth acquired a 50% stake in ASK.
The transaction has cemented a long-standing and successful working relationship
To discuss the rationale behind this transaction and how they plan to navigate the challenging economic times as partners, Daniel Austin, ASK’s CEO and Co-founder, and Ben Barbanel, OakNorth Bank’s Head of Debt Finance, hosted a webinar for clients and investors.
Here are some of their responses to key questions raised during the webinar:
What were the drivers behind the transaction for each party?
Ben: “It enables us to continue to deliver for all of our clients because as a regulated bank, we’re never going to be the most aggressive lender. Having an alternative capital set available to us, enables us to offer our entrepreneurial customers different capital structures beyond just senior debt. It allows us to offer more than just a regular bank.”
Daniel: “A number of parties were interested in our proposition, but we wanted to make sure we were not creating two competing sets of capital which would then impact on the extensive and loyal base of investors we have worked hard to build up. The attraction for us was the lack of competition but also the strength of our existing relationship and a partnership that allows us to continue to pursue our business model unchanged.”
We are currently facing very challenging economic headwinds. What is your outlook for the sector?
Ben: “Everything we are facing at the moment is making the market incredibly challenging. However, successful entrepreneurs always find a way and adversity brings opportunity. There are experienced professionals who have seen these cycles before and market turmoil often enables the best to rise to the top.”
Daniel: “An added burden in an already challenging market is the rising cost of repurposing secondary real estate and new builds because of inflation and ESG requirements. However, people still need places to live and want leisure activities even in hard times, so that demand will drive new projects. As a business, we are young with a nimble operating structure and have a blend of experience that has worked through economic cycles, so we will be looking to back borrowers with big discounts on primary real estate in excellent locations. I think with yields at the same as interest rates, secondary and tertiary property will really struggle.”
What is your appetite for lending in the current climate and do you expect to see a reasonable flow of opportunities?
Ben: “We use our forward-looking scenarios as a barometer for credit risk and if those scenarios are met then we will lend. We’re looking for well thought out and rational projects and the credit committee is still seeing a healthy flow of decent opportunities.”
Daniel: “We will be looking for strong opportunities resulting from the downturn. I expect many institutions will be making quick decisions to get rid of assets on their balance sheets, meaning there will be discounts to be had on exceptionally good quality and highly tradable assets. There will also be numerous refinancing opportunities.
We want to grow and stay active, to continue to support our clients and meet the diverse requirements of our investor base. Working with OakNorth gives us more scope and flexibility to deliver on those ambitions. We hope to emphasise our reputation as a lender through economic cycles, but will be looking to do this very cautiously.”
