Redwood, the British challenger bank for SMEs, is looking to raise fresh capital through a reverse takeover of London-listed R8 Capital Investments.
Under the terms, R8 will acquire the entire issued share capital of Redwood Financial Partners Ltd (RFPL), by a share-for-share exchange, giving the shareholders in RFPL a majority holding in R8.
R8 intends to carry out contemporaneous new issue of capital which will be contributed to the Bank as common equity tier 1 regulatory capital.
Redwood opened in August 2017 after being ‘born in the cloud’ and achieving one of the fastest licence-to-launches in UK banking history, with a focus on offering secured SME mortgages for business owners.
The specialist lender, which started with a team of 12 and now employs more than 125 employees, posted its first pre-tax operating profit of £2.2 million in the year to December 31, 2021, compared to a £1.7 million loss in 2020. Over the period, the bank saw its loan book increase by 14% to £370m and notched a 15% rise in deposits to £438m.
The launch of fixed rate loan products for specialists landlords has further fuelled growth in the first six months of 2023. Unaudited figures show a record profit before tax of £2.8m for the six months to 30 June 2023, more than double than for the same period last year.
The extra capital sourced from the RTO will enable the bank to grow its lending capacity and bolster opportunities for diversification into providing finance in adjacent asset classes.
Gary Wilkinson, co-founder and CEO at Redwood Bank, says: “Completing this transaction would be a major step forward for us, providing an excellent opportunity for Redwood to raise more capital, grow and diversify."