Nucleus in talks on £15m rights issue

Nucleus is consulting shareholders in a bid to raise £15m in a debt restructuring exercise as the IFA-owned wrap reports a 250% increase in Q1 inflows.

The capital raising exercise, set to be completed by the end of the year, is being undertaken to refinance debt and bolster its balance sheet. The wrap is looking to member firms and shareholders to raise the required £15m, with CEO David Ferguson ruling out an approach to the capital markets.

Ferguson says the fund-raising initiative is being undertaken to pay back debt accumulated when the wrap was established four years ago. A significant portion of the debt is owed to South African insurer Sanlam which owns a 42% stake in the business.

The capital raising comes amid a strong set of financials for the wrap, with Q1 inflows up around 250% compared to last year and annualised turnover now exceeding £6m. Current AUM is £1.9bn.

Company accounts filed yesterday for the year to 31 December 2009 show Nucleus reported a 140% increase in turnover to £2.41m, with Ferguson hailing the year as one of "huge importance".

In April of this year it recorded its first cash positive month.

"As a business, we are now looking to capitalise on this momentum and, working with member firms to refinance our debt so the balance sheet is more in line with current and future ambitions of the business," says Ferguson.

He says initial talks with shareholders indicate "a strong level of support" for the capital raising and says an approach to the capital markets is not on the cards.

Although Ferguson has set out plans to eventually float the business he says now is not the right time.

The wrap currently has 79 IFA member firms, one of which has just become the first to put £100m of assets on the platform, with a new firm set to sign up imminently.