U.K. Takes Stakes in 37 Firms After Covid Loans Converted
U.K. Takes Stakes in 37 Startups That Couldn’t Repay Covid Loans
The U.K. government has taken stakes in 37 startup companies after state loans to help them grow during the pandemic were converted into equity.
The figure was revealed Friday in response to a freedom-of-information request by Bloomberg to the British Business Bank, which administers the so-called Future Fund program. While the government is usually averse to taking stakes in private companies, the bank said 30.4 million pounds ($42.4 million) of loans had been converted.
The Future Fund was announced in April to ensure “high-growth” startups got funding to continue operations as the coronavirus triggered the worst recession in more than 300 years. Billed as a 500-million pound program, it’s issued 1,140 loans worth 1.1 billion pounds.
The bank declined to provide details of the companies in which the government now owns stakes, or the size of the state’s holdings.
“The Convertible Loan Agreement in place with each investee company is confidential in nature,” it said. “The disclosure of the names of the companies which the government owns an equity stake in and the details of the loan value converted to equity and the percentage stake the government now owns in each company would constitute a breach of confidence.”
Under the program, loans ranging from 125,000 pounds to 5 million pounds were made to U.K.-based startups, subject to them securing at least an equal amount of funding from private investors. The deadline was Jan. 31, though processing of existing applications meant the number of loans issued was still rising this month.
All 37 companies have had a new funding round -- one of the circumstances outlined in the loan agreements under which the lending is converted into shares, according to the bank. The term of the loans is 36 months, at the end of which the government can choose to be repaid, or allow the loan to be converted into a stake if that hasn’t already happened.
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