Special Purpose Vehicle and Implementation Support

SPV Strategic considerations. When to use an SPV - To accompany the SPV blue print work below we need to see the high level rationale for where the use of this SPV is appropriate - what it achieves and what it cannot eg it may also be appropriate to consider what aspects of our social imperative can be achieved through the SPV and where wider obligations may be more appropriate, eg our Affordable Credit Code of Good Practice may be something we seek to have the entire organisation adopt, not just function within the SPV. This should address where not using an SPV but addressing the interplay between our capital and existing investors is aptly covered in an inter creditor agreement, and where this is not desirable.

Fair4All Finance required the following implementation partners to put in place the complex special purpose vehicle arrangement set out in the blueprint(s) (Lot 1) which will also articulate the required permissions (if any) needed for each party:

Lot 2 a: Legal advisor to draft appropriate services contracts, set up the entity and articles etc and to incorporate the detailed arrangements to achieve Fair4All Finance's social purpose set out in the blueprint.

Fair4All Finance required the following implementation partners to put in place the complex special purpose vehicle arrangement set out in the blueprint(s) above which will also articulate the required permissions (if any) needed for each party:

• Lot 2 b: Managing agent to oversee the operation of each instance of the SPV that is deployed.

Other relevant CPV codes for Lot 2b include:

1. Corporate finance and venture capital services.
2. Financial consultancy, financial transaction processing and clearing-house services.
3. Investment banking services and related services.
4. Legal

We require the following implementation partners to put in place the complex special purpose vehicle arrangement set out in the blueprint(s) above which will also articulate the required permissions (if any) needed for each party:

• Lot 2 c: Fail over lender / provider - organisation ready to step in to operate the work covered under the SPV as and when needed.

Other relevant CPV codes for Lot 2c include:

1. Financial and insurance services
2. Financial consultancy, financial transaction processing and clearing-house service

Fair4All Finance require the following implementation partners to put in place the complex special purpose vehicle arrangement set out in the blueprint(s) (Lot 1) which will also articulate the required permissions (if any) needed for each party:

• Lot 2 a: Legal advisor to draft appropriate services contracts, set up the entity and articles etc and to incorporate the detailed arrangements to achieve Fair4All Finance's social purpose set out in the blueprint.

Fair4All Finance require the following implementation partners to put in place the complex special purpose vehicle arrangement set out in the blueprint(s) above which will also articulate the required permissions (if any) needed for each party:

• Lot 2 b: Managing agent to oversee the operation of each instance of the SPV that is deployed.

Other relevant CPV codes for Lot 2b include:

1. Corporate finance and venture capital services.
2. Financial consultancy, financial transaction processing and clearing-house services.
3. Investment banking services and related services.
4. Legal

SPV strategic considerations -

Our requirements set out below relate to how we use SPVs to support our delivery.

When to use an SPV - To accompany the SPV blue print work below we need to see the high level rationale for where the use of this SPV is appropriate - what it achieves and what it cannot eg it may also be appropriate to consider what aspects of our social imperative can be achieved through the SPV and where wider obligations may be more appropriate, eg our Affordable Credit Code of Good Practice may be something we seek to have the entire organisation adopt, not just function within the SPV. This should address where not using an SPV but addressing the interplay between our capital and existing investors is aptly covered in an intercreditor agreement, and where this is not desirable

Use of public funds - Our funding is deemed to be public funding and our investment principles therefore include compliance with subsidy / state aid constraints and considerations about private gain.

• Where we are providing capital as part of an investment therefore, our requirement is to usually invest on similar terms to the rest of the market, unless a robust argument can be made for subsidy eg serving a portion of the population for whom risk is higher where there is a positive social impact, warranting a different return.
• Where we procure a provider to deliver something for us, eg testing of a proposition, and we transparently compete that work setting out our intention to provide capital to enable the testing, this competition steps us outside of subsidy considerations
• In both scenarios we would want to avoid undue private gain accruing to the counterparty and this should be considered in the advice set out against our requirements below for the blueprint

Blueprint - simple special purpose vehicle

We are seeking a simple blueprint, which we can use repeatedly, when we are providing capital to enable lending and wish to ring fence it for a specific purpose. Such a vehicle may also be used for other activities (eg other financial resilience and financial inclusion initiatives that may for example involve subsidy to support specific customers, underwriting etc).

Blueprint - complex special purpose vehicle

We also recognise the need for a more complex SPV where scale, complexity or risk warrant a more nuanced and granular approach. This may be more relevant when we are working with commercial providers or where we are working with not for profit providers where complexity in their existing capital stack warrants this delineation. We expect this blueprint to be suitable for additional protections are needed around our funds. In this model we would expect the following elements to be included in the blueprint:

• managing agent being appointed to oversee the utilisation of the capital and flows of funds to and from the SPV and clarity about the capabilities and regulatory permissions they may need to deliver effectively for us
• detailed contracting arrangements setting out the arrangements for the transfer of intellectual property, customer data, and the beneficial title to loans vs the loan note of record transferring from the originator to the SPV
• facility to transfer the delivery arrangement to a fail over / standby provider / lender to act for us if needed and clarity about the capabilities and regulatory permissions they may need to deliver effectively for us; we also need to understand the full scope of protections that would need to be considered to effect this eg rights of assignment, fair processing notices, whatever else needs to be considered in these arrangements both in a customer facing and a back office setup.
• means by which this vehicle could most optimally be reused as a blue print - eg how to template the arrangements as much as possible, and what elements would be varied each time
• would want to understand the likely 3rd party setup costs and the running costs and how any variation in options would influence this
• what structure and resourcing we'd need for the managing agent construct (inc what the implications are for our team re what we'd need to have in place our side)
• what options are relevant to us ensuring that the way in which the way in which the SPV and services contracts associated reinforce and incentivise the approaches to customers that we are intent on delivering eg consistent with our Affordable Credit Code of Good Practice
• how to approach and formalise pricing ensuring an appropriate balance between the interests of the SPV and those of the underlying organisation and to reflect the social purpose of Fair4All Finance.

We require the following implementation partners to put in place the complex special purpose vehicle arrangement set out in the blueprint(s) above which will also articulate the required permissions (if any) needed for each party:

• Lot 2 c: Fail over lender / provider - organisation ready to step in to operate the work covered under the SPV as and when needed.

Other relevant CPV codes for Lot 2c include:

1. Financial and insurance services
2. Financial consultancy, financial transaction processing and clearing-house services.