Borrowing against an illiquid estate

A principal whose wealth is four fifths a single private company is not wealthy in any sense a lender recognises. The asset cannot be sold in part, cannot be valued daily, and cannot be enforced against without destroying the thing that secured the loan. The Private Wealth and UHNW division lends against such positions, and the structure that makes it possible is not a higher margin. It is a much lower advance rate and a different trigger.

The private-wealth credit book stood at US$96 million across 23 facilities at 31 October 2025. The average advance rate is 32 per cent of an independently determined value, against 55 to 70 per cent typical of facilities secured on listed collateral. No facility is secured on a single private position for more than 40 per cent of that position value. Eleven of the 23 facilities are secured on more than one asset, and six carry no security beyond a covenant package.

Value is determined every six months under the Valuation of Investments policy, by people who do not sit in the lending team, using the method applied to the positions of the group itself. A borrower may not supply the valuation. Where the company publishes audited accounts the valuation begins there. Where it does not, the division uses a transaction-based method and applies a discount for the absence of accounts, which has ranged from 10 to 25 per cent.

The facilities carry no margin call. A margin call on an illiquid asset is a demand the borrower cannot meet and the lender cannot enforce, and it turns a slow problem into a fast one. A fall in value below a stated level instead converts the facility from interest-only to amortising over 36 months, and a further fall raises the amortisation rate. The borrower keeps the asset and gives up cash flow, which is the trade both sides are able to perform.

The division declines any facility whose repayment depends on a sale that has not been mandated. An intention to sell is not a source of repayment. Where a borrower expects to sell, the facility is sized so that it can be serviced and repaid from distributions and other assets if the sale never happens at all. Nine enquiries were declined on that basis in the two years to 31 October 2025, and three of those nine returned later with a mandated process.

Three facilities repaid early during 2025 when the underlying companies were sold, one of them 19 months ahead of maturity. No facility in the book has required a covenant waiver since it was written. That record reflects the advance rate more than it reflects credit judgement, and the division treats it accordingly. The measure it watches is not losses, which are rare and late, but the share of facilities where the second valuation came in below the first.

Published 2025-12-09 by the Private Wealth & UHNW division. Research is prepared for eligible counterparties and does not constitute advice.