The UK Government has increased the number of Welsh firms it holds equity stakes in under its Covid response £1.1bn Future Fund.
The now closed fund provided £1.14bn loans to high-growth potential firms across the UK with the option for the debt to be converted into equity for the Westminster Government.
According to new figures the fund, run through the UK Government’s economic development bank, the British Business Bank, has seen the number of firms converting debt to equity rising to 337, of which eight are based in Wales.
In total 1,190 firms received funding with 25 recipients in Wales, who drew down a combined lending value of £18.7m. Firms in London dominated the fund with more than 600 companies sharing around 64% of the total funding at £646.8m. When adding to the south-east of England the number of firms swelled to more than 700 and on value to just over £777m of the total.
Under the Future Fund firms needed to have raised £250,000 in a previous equity round. It provided funding up to £5m.
When debt is converted into equity the UK Government gets a stake at a 25% discount to the required match funding investors.
Welsh firms where the UK Government now has small equity interests in include Llangennech-based cleantech venture Hydro Industries.
Hydro secured £3.5m from the Future Fund with £4.6m from existing backers. With the Future Fund debt now converted into equity it gives the UK Government a 2.5% stake in a deal that values Hydro at north of £150m.
The match equity came from existing shareholders in the business that include co-founders of Admiral Henry Engelhardt and his wife Diane, and David Stevens and Heather Stevens.
The UK Government also has a small stake of less than 3% in Alternative Investment Market listed home-testing healthcare firm MyHealthChecked. Its ownership interest came as a result of MyHealthChecked’s acquisition of Nell Health last year for £1.5m with the vast majority satisfied through the issuing of new shares. Nell had been backed by the Future Fund and had seen its debt being converted into equity before it was acquired. As a result of its acquisition this has gave the Treasury a share interest in MyHealthChecked.
Other Welsh firms where debt has been turned to equity for the UK Government are tech firms LGN Innovations, based in Denbigh and Cardiff-based We Build Bots, Cardiff-based life sciences venture Momentum Bioscience and Powys-based hydrogen vehicle pioneer Riversimple.
In the latest published tranche of firms converting debt to equity are Cardiff-based fintech firm Delio, Swansea medical devices firm Calon Cardio Technology and Cardiff-based digital financial inclusion venture Pockit.
Ken Cooper, managing director, venture solutions, British Business Bank said: “The Future Fund was created to increase the flow of capital to companies at the height of the pandemic, while ensuring long-term value for the UK taxpayer. We’re delighted to see this flow of companies going on to raise further private sector capital. As a shareholder in these businesses, the Future Fund is well positioned to share in the benefits of their continued growth.”
