Time Finance, the niche non prime SME lender, is holding a strategy update tomorrow. It's an interesting time for Time…
3 major change/disruption factors:
- Covid and the aftermath including govt backed spraygun lending to SMEs
- Inflation / recession risks
- New CEO and new growth strategy flagged last year
- Arena Investors took 20% stake in biz on 22/4/22 taking over Wellesley Finance’s stake (see notes at bottom to learn more on Arena)
1&2: is unwinding so SMEs are returning for ‘normal’ finance with early 2022 looking encouraging in asset financing, invoice financing and lending but clearly there are economic clouds so we wait to see what the impact is and how it meets with normalisation. On balance and very simply I’d say things going in the right direction but perhaps a bit slowly for many impatient equity investors.
3: I believe actions taken to focus on and support organic growth in ‘own book lending’ is good and where high durable returns can be generated.
4: This is what really gets my attention! Arena are hardcore…
Arena are not passive investors in stocks waiting for value to be realised and highly averse to ‘roach motel’ value investing. Time Finance (previously 1pm) is the definition of a roach motel value trap…what’s going on?
They are control freaks and hands-on active investors focused on credit and asset value situations. Their preference is for illiquid and higher yielding assets that are securely value backed in some way that they can see through to value realisation on relatively short time frames or with very secure protection underpin. Often these assets are subscale for other investors meaning that abundant global liquidity has not found its way into the situation to narrow the fundamental value gap. Arena is fully operationalised to execute on the personal investment biases of founder Dan Zwirn.
To a significant extent Arena’s approach echoes what and where Time Finance lend. Time’s individual transactions with clients are too subscale for Arena but in aggregate you have a portfolio of loans that roughly fits the Arena DNA.
Q: Are Arena likely to be passive value investors in Time? A: Unlikely.
I thought it highly unlikely that Arena took their position without some meaningful interaction and prospective scene setting with current senior management of Time. It's just not their approach. However, I exchanged emails with the Chairwomen Tanya Raynes several weeks ago and she says Arena have…
