The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian investment bank yesterday asserted that its acquisition of a 20 percent ownership stake in a prominent non-bank institution “ticks all the boxes” for targeted returns and client wealth creation.

Gerhard Beukes, RF Bank & Trust’s vice-president and group head of funds and investment banking, told Tribune Business that buying into the Simplified Group of Companies gives it a minority equity interest in an “industry leader in a number of areas” including artificial intelligence (AI), pre-owned hybrid autos, and the provision of loans and insurance to small and medium-sized businesses (SMEs).

Declining to give a dollar figure on the investment, which is understood to be a multi-million dollar sum injected via RF Bank & Trust’s private equity fund, he added that the investment bank is “very comfortable” about deepening the tie-up with Simplified following its recent provision of a $50m bond financing facility for the latter.

Mr Beukes, disclosing that the RF Strat-Equity Fund typically targets “unleveraged returns of between 15-20 percent” on its investments, told this newspaper that its capital injection will enable Simplified to “accelerate” the lending and financial support it provides to Bahamian SMEs in its role of “bridging the gap” to more conservative commercial banks.

Explaining that RF Bank & Trust is “seeking to be very strategic in terms of acquisitions”, focusing on industries with local and global growth potential such as AI, Mr Beukes said of the Simplified investment: “I think everything starts with an idea. I think we’ve been in active discussions for around six months, but the idea has been around for a much longer time.

“I’d say we’d been negotiating and getting things done in six months. The best deals are ones where the buyer and seller are happy with the valuation. This is one of the better ones where the buyer and seller are completely comfortable with the valuation.”

Asked about the benefits for RF Bank & Trust’s private equity fund and its clients, Mr Beukes added: “It obviously creates a different product that our clients can invest in that may not exist in the current investment banking space. We’re seeking returns from this investment through both dividends and the equity valuation. It ticks all the boxes we want to see from a targeted investment…

“This non-bank financial institution sector is becoming more relevant in The Bahamas, and us knowing the guys at the Simplifed Group of Companies and understanding they are running a very good organisation, we feel this is a very good opportunity for the Fund and it creates an opportunity for our clients to invest in this opportunity as well.”

Simplified’s lending activities specialise in what is, for The Bahamas, innovative methods for meeting SME capital and financing needs. These involve asset-based and factoring lending, the latter involving credit advances which are secured against the accounts receivables owed to a company which it has yet to collect upon.

The RF funds and investment chief said non-bank financial institutions, such as Simplified Lending, have “become more mainstream in recent years” in The Bahamas and other nations. They are increasingly “bridging the gap” for SME and start-up financing needs, advancing credit to entities that would otherwise be rejected by more conservative commercial banks.

While this sector will eventually attract greater regulation, Mr Beukes said he and RF Bank & Trust “don’t see any systemic or material risks” stemming from an industry that is viewed as a complement - rather than competition - to mainstream financial services. “I view Simplified as playing a bridging role and continuing to grow with The Bahamas market over the next economic cycle,” he added.

“This is one of the investments we see as strategically significant… I think that, from the Simplified side, we are very happy with how they innovate and grow. Innovation often leads to growth. We’re very comfortable that they’ll be an industry leader in their sectors and ancillary sectors, and think the returns will satisfy the Fund’s investment mandate…

“I think they [Simplified] are applying their disciplined view regarding finance to other industries, and we are very excited to see what they do in them. They have a very keen eye on AI. We see them as a leader on a number of things.”

Noting that the “conventional” Bahamian commercial banking industry has “a lot of idle capital”, with excess liquid assets greater than $3bn, Mr Beukes said the demand for financing from SMEs continues to grow and “Simplified Lending fulfills that demand very nicely”. He added: “I think the market will grow, and the industry will grow. There might be growing pains, but this industry will grow.

“There is a gap. People find it difficult to get funding if they do not meet the risk profile of more conservative commercial banks. There’s enough space in the market to co-exist.” Mr Beukes said RF Bank & Trust is continuing to explore a “very wide range of industries” in a bid to generate higher returns and more wealth-creating opportunities for its clients.

“Across the globe, alternative financing solutions are an essential complement to traditional banking, and The Bahamas is no exception,” he added. “By taking a stake in Simplified, RF is investing not only in a company but a financial ecosystem that continues to empower Bahamians, grow local enterprise and strengthen our economic landscape. “

The Bahamian investment bank earlier this month disclosed that it had already placed and raised an initial $10m tranche from the $50m bond facility, which is designed to provide Simplified Lending with the capital it needs to fully fund job-creating expansion among Bahamian SMEs and, in so doing, accelerate the Bahamian economy’s growth and make it more resilient.

That initial $10m bond offering, which opened on July 17, was closed within 48 hours. The remaining tranches will be drawn down over the next 36 to 48 months to enhance access to capital for Bahamians.

“At Simplified Lending, we have successfully secured over $200m in financing for our clients, demonstrating our commitment to unlocking financial opportunities and driving economic growth,” said Robert Pantry, its chief executive and founder, said at that time.

“Our collaboration with RF continues to support our evolution as a direct lender focused on helping small and medium-sized businesses. Since the drawdown of the first tranche in July, we have already approved more than $3m in loans for SMEs, with another $4m currently in the pipeline as they go through the approval process.”