Linklaters applies City skills to Charity Bank pro bono advice” />Linklaters has advised on a groundbreaking piece of pro bono work that has allowed a charitable financial institution to raise capital through a debt issue.
The magic circle firm, led by capital markets partner Jim Rice, advised the Charity Bank on a recent debt issue, the proceeds of which will help finance its social enterprise work. The deal is believed to be the first of its kind for the UK charity sector.
The Esmée Fairbairn Foundation and Northern Rock Foundation each subscribed to £500,000 of 10-year subordinated convertible loan stock issued by Charity Bank. The bank pays interest of 4 per cent per year for the funds.
Northern Rock Foundation director Fiona Ellis says: “Charity Bank has offered the foundation a welcome opportunity to invest some of our reserve in direct pursuit of our mission. We’re delighted to be able to use our resources in as many ways as possible to help charitable organisations.”
Esmée Fairbairn finance director Ron Clarke says: “The foundation has been a long-term supporter of Charity Bank and we’re pleased to be able to extend our support.”
Although debt issues are commonplace in the public and private sphere, Charity Bank’s transaction is thought to be the first time a British community development financial institution has tried to raise funds in this way.
Charity Bank chief executive Malcolm Hayday says: ‘If community development finance is to move from the margin to the mainstream in the UK, it has to be adequately capitalised. The ability to attract capital from socially motivated individuals, trusts and institutional investors is a major challenge for all of us.”
The deal threw up a number of issues for its team of lawyers. The transaction had to comply with Financial Services Authority regulations. There was also no template documentation to show prospective investors.
“What’s interesting about this piece of pro bono work is that it is a City firm, doing City-type work, but on a smaller scale,” explains Rice. “It’s great to be able to use skills and knowledge we’re familiar with on a piece of pro bono work. I think we’ll see more City-based pro bono work in the future.”
The proceeds will help fund Charity Bank’s lending business, which, since its launch, has made more than £40m of loans to more than 430 charities and community groups.