From anaerobic digestion plants, submarines, Rolls Royce engines, power heating units for the largest tomato grower in the UK and even a furnace for an IKEA glassware supplier, SQN Asset Finance invest in business-essential, revenue-producing (or cost-saving) equipment, which is leased to companies.
The average transaction size is generally between £5-£15m, with a typical lease term of three to ten years. This keeps the portfolio well diversified and away from interrelated changes in the marketplace. At the end of the agreement, due to the business-critical nature assets, the lessors often extend the lease term or, in some cases, buy the depreciated asset from SQN.
The agreements require the borrower to bear all tax, maintenance, insurance and other costs related to the lease or the operation of the underlying asset. The interest received provides regular cash flow to cover operating expenses and pay dividends to shareholders.
The investments do not come without the occasional issue, but such concerns are built into the business model. The company always own the asset, so in the event of a default can secure it and, if needs be, readily find an alternative home for quick redeployment to ensure income loss is minimised. Portfolio managers Neil Roberts and Jeremiah Silkowski are experts in the field, with a combined experience in the leasing industry of over sixty years.