ECSPONENT, a specialist lender to small to medium enterprises, is confident its preference share-based funding model remains robust. Speaking after the release of strong interim results to end-June, chief operations officer Terence Gregory said the company was achieving returns on capital of more than 30% from its niche lending activities. "The servicing of our preference share liabilities is going well. We monitor our lending activities very carefully, but remain confident we can generate returns on capital of between 30% and 40% a year." Ecsponent’s funding is mainly derived from the regular issue of preference shares, which have higher-than-average coupon rates of 10%-13% — even as high as prime plus 4%. Some market watchers have raised concerns over the strenuous and sustainable growth needed to service this preference share liability. Gregory said that Ecsponent had issued about R441m worth of preference shares in various tranches since 2014. "The critical issue for us is that ...

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