Why LEON's CFO just completed a debt re-finance with one of the UK's newest banks

Written by Antony Perring, CFO of LEON, the Naturally Fast Food Chain 

FOLLOWING the banking crisis there have been a number of very positive developments in the UK for raising debt into private companies. Much of this has emerged as a result of the contraction in lending by the big banks.

The first LEON opened in Carnaby Street in 2004 with the aim of helping everyone to eat well. Our founders John Vincent and Henry Dimbleby always said it was a global business and that they wanted to bring a LEON to every major international city.

But rolling out new food outlets is relatively capital intensive and each new store costs approximately £500,000. Our goal to bring Naturally Fast Food and the opportunity to eat and live well to people on high streets all over the world gives us an enormous appetite for growth funding. So as well as borrowing from traditional banks as we have expanded, we have maintained a keen interest in entrepreneurial new financing opportunities. In 2012 we raised new debt via a Customer Bond, which as well as providing investment funds, gave many of our customers the opportunity to share the benefits of our success.  More recently in 2014/15 we looked at Crowd-based Debt Funding, a rapidly growing sector, although chose not to pursue the opportunity favouring a big bank package at that time.

The UK has seen a wave of new banks emerge in recent years, so it made sense for us to explore working with one. These banks have been set up with the intention of competing for business with the big banks, either by offering better service, better commercial terms, or both.

Although we’re very happy with our relationship with HSBC, as well as the service they’ve provided us in the past, we have just completed a debt re-finance worth £19m with OakNorth Bank, one of the UK’s newest banks.

In some ways the process of securing funding was similar to that which is followed with traditional lenders, while in other ways it was refreshingly different. They asked for detailed financial information, both historic and forward looking, and the lending decisions were committee based. The loans are broadly similar in nature to traditional structures consisting of core debt, growth facility, and RCF/overdraft, although a significant “overfund” of core debt will better enable us to invest back into our existing business as well as borrowing to expand our estate across the UK.

However the differences in their approach have been remarkable, with the most notable elements being speed, transparency and a personalised service.

OakNorth completed our deal within two months of our first introductory meeting. One off decisions throughout the overall negotiation process were delivered fast, typically on the same day. It promises full transparency in their process, and they invited key directors from the borrower to join the credit committee meeting (in our case CEO, CFO and chairman).

Clearly there is a lot of uncertainty following the Brexit vote result, and many challenges ahead, but also opportunities for companies like LEON who are confident about their ability to grow cash flow.

A continuing era of low interest rates shows little sign of coming to an end, all the more so following the Brexit vote, and more choices and flexibility as to how to access growth funding will certainly help LEON fulfil its goal of helping everyone to eat and live well.