Terms of loan now depend on a full audit of assets

The Financiers
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The Independent Online

The company that pledged the final part of the Phoenix consortium's war chest, enabling it to clinch a deal for Rover is a little-known corporate lender owned by an American bank.

The company that pledged the final part of the Phoenix consortium's war chest, enabling it to clinch a deal for Rover is a little-known corporate lender owned by an American bank.

Burdale Financial, which is 80 per cent owned by the First Union Bank of North Carolina - the United States' sixth largest bank - came to the aid of the Phoenix group with an asset-based loan, a relatively new source of funding in the City.

Burdale is one of a handful of commercial lenders in the United Kingdom which only grant loans that are backed up by an assessment of a company's specific assets, from stock to land and buildings.

Under the terms of the deal, Rover Group assets will be set as collateral against the value of the loan. This will give Burdale "some security", a spokesperson said. But he denied that the company would seize the assets if the new management failed to make repayments. "Terms are negotiated on a deal-by-deal basis and this is not part of the Rover deal", he said.

The deal is subject to "due diligence", a process that will involve a thorough assessment by Burdale of Rover's fixed and paper assets. Many of the final terms - including how much interest the group will have to pay - will be based on what the lender's auditors find in their 10-day examination of Rover, which has not yet been scheduled.

Sources say the Phoenix group, headed by John Towers, former chief executive of Rover, is likely to have to pay interest of 2 per cent above banks' benchmark lending rates.

The £200m loan is the biggest deal the London-based Burdale has signed up to since it was created in 1997. Dennis Levine, the chief executive, refused yesterday to explain why the commercial financing company agreed to back the Phoenix group.

But it is thought that the company desires to move up a step from the medium-sized companies it already finances. It is currently tied up with the Swiss watchmakers Mappin & Webb and the specialist guitar makers Fender in deals worth less than £10m.

Burdale has increased its pot of funds available to customers from £10m to £150m since 1997, with the Phoenix loan a further increase on that. Its parent organisation, First Union, isa major player in corporate lending in the US, with assets totalling more than $210bn (£137bn) and a market capitalisation of $32bn.

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