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On Friday legal agreements were signed between HCT Group (the social enterprise formerly know as Hackney Community Transport) and several investors on two new instruments, a Fixed Rate Loan and an innovative “Social Loan”, where the interest rate is tied to the growth in sales at HCT from an agreed level. This gives investors some of the features of equity (although the return is capped at 20%), without HCT sacrificing any of the control associated with an equity issue. ClearlySo’s sister company Catalyst Fund Management & Research Ltd. advised on the transaction, and Bridges Ventures led the round and were joined as co-investors by the Social Investment Business. It is expected that this £5 million financing, to take place in two rounds, will find other social investors as well as mainstream wealth managers like Rathbone Greenbank involved as investors. For a sector looking to grow, such a transaction, by such a high-quality/high-growth firm as HCT, establishes a benchmark which is likely to help draw further investment into the social business and enterprise sector.

The importance of a benchmark cannot be overstated. We have heard for some time, and ourselves believe, that there is a wall of money is sitting in the hands of fund managers and advisors, on behalf of their clients, looking to get into the sector. The complaint is that there are no quality assets to purchase. The two instruments issued by HCT clearly meet that threshold and set some pricing standards and guidelines for other instruments which will undubtedly be issued by other social businesses and enterprises. Some may feel I am biased, as I personally advised HCT on behalf of Catalyst, a disclosure I feel compelled to make. But I must also note the key role of Antony Ross (and his team) from Bridges, who cornerstoned and structured the deal.

Of course the most credit needs to go to Dai Powell and his colleagues at HCT Group. It is they who have built a very successful, admirable business, which generates substantial surpluses AS WELL AS generating social returns–proving this need not be an either/or choice. And they have done this at a time when other bus companies (both of the conventional and social enterprise variety) have faltered.

Dai in particular is also a great example to all social entrepreneurs and to the virtue of persistence. He lost jobs in fishing, mining and steelworking before he came to London 20 years ago and worked his way up from being a bus driver to CEO. This is a slight contrast to the picture we sometimes form of modern social entrepreneurs, gliding towards success. Also, there exists an image in the minds of many observers of social enterprise as a collection of trendy, fashionable activities. HCT proves that you can be a successful social entrepreneur across sectors of the economy. We are delighted, for HCT, for Dai and his team, for Bridges and the SIB, for Catalyst–and of course, for the sector.

Rodney Schwartz

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