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Post by andrewh on May 27, 2019 21:33:13 GMT
Hi I’ve not posted much in the last 12 months but I thought I might add my tuppence here. I make no comment on the specifics of the Lendy Administration or events prior because frankly I know nothing. My comments are purely for guidance to investors. First off, Administrators. These guys are highly qualified accountants and solicitors. The Joint Insolvency Examinations Board exam (JIEB) is passed by about 10-20% of those that start the process. It’s bloody tough. Insolvency laws in the UK are robust and are there for good reason. The Administrator, in this case Damian Webb at RSM, has very specific duties. His main duty is to ALL creditors, large or small, secured or unsecured. His main focus will be to recover the most he can for creditors, but this comes at a cost. If they didn’t do the job then the whole process would be unwieldy and chaotic. This also means they get paid first out of any insolvency or recovery process. Otherwise, why would you do the job without pay? There’s more info here. www.begbies-traynorgroup.com/articles/rescue-options/what-duties-does-an-administrator-have-to-creditors-in-a-formal-insolvency-procedureI would imagine Damian’s first job will be to see if the business can be saved. This will be a review of assets and liabilities, as well as income and expenditure. If there is a way to save the company including selling it, that will be put to creditors. If there isn’t a way to save it then an liquidation process will start. For P2P lenders there is a requirement for cash to be ringfenced to cover the cost of running down the book in such circumstances. There is also a requirement to have a contract in place with a “stand-by servicing” company who can take over the loan book management. Therefore, the loan book should get managed if everything is in place. Collateral didn’t operate under these rules as they weren’t regulated. Without knowing the full facts, I can’t judge BDO on their work until the final report is out. I know it’s difficult not to let your emotions run wild. You might have lost a lot of money, and I feel your pain. However, i’d suggest letting Damian and his team get on with it. He’s a good guy who I know personally. I’d wait and see what his first statement says before casting judgement. He only got the job on Friday and it’s a bank holiday weekend. I’m not adding further comments. |
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Mousey
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Post by Mousey on May 27, 2019 22:36:44 GMT
With such a clear, sensible and informative post I hope you don't leave it another 12 months before your next one.
I do have a couple of comments if I may:
"For P2P lenders there is a requirement for cash to be ringfenced to cover the cost of running down the book in such circumstances." - That must gobble up a few '000's surely?
"I can’t judge BDO on their work until the final report is out" - is it likely we will ever receive such a report from about Lendy... will we ever know what truly went wrong under the administration of Liam Brooke and Robert Kelly?
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wuzimu
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Post by wuzimu on May 27, 2019 23:28:57 GMT
The only way lenders are going to be told what went on at Lendy is if these things happen:
1. Court proceedings produces documents in the public domain that cast light on events.
2. FCA removes Liam Brookes / Paul Coles permissions. In that case there will be a Decision Notice published by FCA - such documents would be very informative.
The administrator will not be informing lenders of what went wrong at Lendy, only a report of who they believe to be creditors of the company, a statement of account and what they see their job as.*
I hope that RSM are good guys and will do a proper and cost effective job.
I will all the same be helping organise a group of lenders to watch and comment on the direction of travel of the administration.
* The issue of whether any or all lenders are creditors of Lendy and SSSH is a crucial issue.
Another crucial issue is that alot (most?) of value of the loan portfolio is the rights of action against PG's, negligent surveyors / valuers and the Director.
I imagine most lenders want those rights of action explored. That goes beyond the remit of 'Wind down' proceedures.
So this will be a contentious area and a focus for Lendy Action Group
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Greenwood2
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Post by Greenwood2 on May 28, 2019 6:30:53 GMT
Hi I’ve not posted much in the last 12 months but I thought I might add my tuppence here. I make no comment on the specifics of the Lendy Administration or events prior because frankly I know nothing. My comments are purely for guidance to investors. First off, Administrators. These guys are highly qualified accountants and solicitors. The Joint Insolvency Examinations Board exam (JIEB) is passed by about 10-20% of those that start the process. It’s bloody tough. Insolvency laws in the UK are robust and are there for good reason. The Administrator, in this case Damian Webb at RSM, has very specific duties. His main duty is to ALL creditors, large or small, secured or unsecured. His main focus will be to recover the most he can for creditors, but this comes at a cost. If they didn’t do the job then the whole process would be unwieldy and chaotic. This also means they get paid first out of any insolvency or recovery process. Otherwise, why would you do the job without pay? There’s more info here. www.begbies-traynorgroup.com/articles/rescue-options/what-duties-does-an-administrator-have-to-creditors-in-a-formal-insolvency-procedureI would imagine Damian’s first job will be to see if the business can be saved. This will be a review of assets and liabilities, as well as income and expenditure. If there is a way to save the company including selling it, that will be put to creditors. If there isn’t a way to save it then an liquidation process will start. For P2P lenders there is a requirement for cash to be ringfenced to cover the cost of running down the book in such circumstances. There is also a requirement to have a contract in place with a “stand-by servicing” company who can take over the loan book management. Therefore, the loan book should get managed if everything is in place. Collateral didn’t operate under these rules as they weren’t regulated. Without knowing the full facts, I can’t judge BDO on their work until the final report is out. I know it’s difficult not to let your emotions run wild. You might have lost a lot of money, and I feel your pain. However, i’d suggest letting Damian and his team get on with it. He’s a good guy who I know personally. I’d wait and see what his first statement says before casting judgement. He only got the job on Friday and it’s a bank holiday weekend. I’m not adding further comments. In theory as bolded above, the administration of Lendy and the orderly run down of the loan book should be separate operations, separately funded. But the dividing line may be a bit fuzzy depending on what has been going on at Lendy recently. If the run down of the loan book works as intended lenders should see loans repaying (if they are not in default) as expected. An important question will be how much funding is actually available in the ring fenced account, to run down the loan book and pursue defaulted loans.
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Post by GSV3MIaC on May 28, 2019 7:07:55 GMT
Another issue, maybe of more interest to borrowers than lenders, is what does 'orderly run down' look like for half-funded DFLs .. presumably the runners-down are not going to sell/deliver further tranches, whatever LY may, or may not, have committed to.
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Monetus
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Post by Monetus on May 28, 2019 7:48:42 GMT
Another issue, maybe of more interest to borrowers than lenders, is what does 'orderly run down' look like for half-funded DFLs .. presumably the runners-down are not going to sell/deliver further tranches, whatever LY may, or may not, have committed to. It would most likely be an issue for both borrowers and lenders if the funding for any additional tranches of DFLs were to dry up. We have seen this with some borrowers on Lendy already I believe. Sometimes the borrower may be forced into default as they are unable to secure financing elsewhere and so they simply run out of funds. If this were to occur and the platform is forced to dispose of the asset via auction or private sale then often a “half-finished” development site is worth significantly less than the final GDV (See Birkenhead on MT for an example). Sometimes the value can be even less than the land value of the cleared site as many developers simply don’t want to touch half-finished projects. It very much depends on the nature of the project however and how far along it is. Some will do much better than others and we’ll have to wait and see what the administrators propose and what solutions are on the table. I really hope that if Lendy won’t be funding additional tranches that borrowers will be able to find the funding they need (perhaps even through another P2P platform) although Lendy were a “lender of last resort” for many at those interest rates.
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Post by brightspark on May 28, 2019 8:15:50 GMT
Are lenders creditors to the platform as their Lendy supervised contracts are with borrowers rather than with Lendy? I am being pedantic but lawyers for borrowers could have a field day.
Lenders are overdue to be repaid money on at least 2 sold investments of which I am aware and perhaps others in which I am not invested. This repaid money should be in the ring-fenced client account. The purpose of the ring-fencing is to stop it from being used for purposes other than the cost of its disbursement. Lendy were very coy about not revealing the size of these 2 recent repayments but at least one of them is likely to have been for several million pounds. Lendy dragged their heels over these repayments for reasons which I suggest are now obvious. Even if the repayment money is not actually in the ring-fenced account the Administrators have claw-back powers to recover the money from elsewhere within Lendy. The ring-fenced account should also contain client money not invested being held on behalf of investors. Any suggestion that the ring-fenced account can be used for general expenditure does not tally with what I read elsewhere re the process of Administration.
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Post by andrewh on May 28, 2019 9:09:55 GMT
Are lenders creditors to the platform as their Lendy supervised contracts are with borrowers rather than with Lendy? I am being pedantic but lawyers for borrowers could have a field day. Lenders are overdue to be repaid money on at least 2 sold investments of which I am aware and perhaps others in which I am not invested. This repaid money should be in the ring-fenced client account. The purpose of the ring-fencing is to stop it from being used for purposes other than the cost of its disbursement. Lendy were very coy about not revealing the size of these 2 recent repayments but at least one of them is likely to have been for several million pounds. Lendy dragged their heels over these repayments for reasons which I suggest are now obvious. Even if the repayment money is not actually in the ring-fenced account the Administrators have claw-back powers to recover the money from elsewhere within Lendy. The ring-fenced account should also contain client money not invested being held on behalf of investors. Any suggestion that the ring-fenced account can be used for general expenditure does not tally with what I read elsewhere re the process of Administration. There's an important point here to be made. Under 36H agreements then: - the investor has lent directly to the borrower
- this is a legal contract and the capital is rightfully the investors', not the platform's, as is the interest agreed to be paid
- the platform has no legal right to the money, except for any servicing fees the borrower pays to the platform
- the only thing that should affect this is borrower default and subsequent recovery processes
- an Administrator can only use funds directly attributable to the platform.
Normally there is a servicing fee being paid by the borrower to a platform. Example, the borrower pays 12% and the investors get 10%, then the platform is getting 2% servicing fee. This fee could be used by the administrator to either cover off creditors or to service the loan book. However, the 10% should be protected under 36H.
This is my personal view of the Administration processes being faced by any P2P lender. This shouldn't be construed as advice to any affected investors.
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wuzimu
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Post by wuzimu on May 28, 2019 9:24:35 GMT
There's an important point here to be made. Under 36H agreements then: - the investor has lent directly to the borrower
- this is a legal contract and the capital is rightfully the investors', not the platform's, as is the interest agreed to be paid
- the platform has no legal right to the money, except for any servicing fees the borrower pays to the platform
- the only thing that should affect this is borrower default and subsequent recovery processes
- an Administrator can only use funds directly attributable to the platform.
Normally there is a servicing fee being paid by the borrower to a platform. Example, the borrower pays 12% and the investors get 10%, then the platform is getting 2% servicing fee. This fee could be used by the administrator to either cover off creditors or to service the loan book. However, the 10% should be protected under 36H.
And this is where the issues of lender Terms come in.
Which terms lenders accept (ie those post 05/03/18 v those terms before) radically changes the 'funds attributable to the platform' as Andrew puts it.
You can bet that the recovery from HQ and Lo****ft , will have already had Lendy funds deducted in the way Lendy decided was fair .. and only the net amounts, if at all, are in the protected client account.
The other issue is what classes of lender, if any, are creditors of Lendy / SSSH. Just owning a loan part does not make a lender a creditor.
RSM in liasion with FCA will need to judge if Lendy and / or SSSH owe lenders a civil liability springing from the conduct of their agency and trusteeship.
A court won't decide that. RSM in liasion with FCA will make that judgement call and that is going to frame the course of the administration.
We'll see.
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sl75
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Post by sl75 on May 28, 2019 10:22:02 GMT
You can bet that the recovery from HQ and Lo****ft , will have already had Lendy funds deducted in the way Lendy decided was fair .. and only the net amounts, if at all, are in the protected client account. With the FCA watching over their shoulder and having to specifically authorise each and every payment, making the FCA complicit in approving deductions on that scale?
My bet would be that Lendy *attempted* to deduct funds in that way, the FCA refused those payments, and as a result Lendy called in the administrators to formally invoke the wind-down arrangements.
That would leave an "undisputed" amount attributable to us, and a "disputed" amount that Lendy claims as fair payment for the services it provided, and the FCA considers unreasonably high, and which the administrators would then need to sort out.
Edit: ... and perhaps the resulting forensic investigation in Lendy's finances will turn up some similar excessive payments that need to be clawed back retrospectively (e.g. it is still unclear what happened to the "missing" £0.5M+ from PBL068...)
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Post by brightspark on May 28, 2019 16:35:37 GMT
There's an important point here to be made. Under 36H agreements then: - the investor has lent directly to the borrower
- this is a legal contract and the capital is rightfully the investors', not the platform's, as is the interest agreed to be paid
- the platform has no legal right to the money, except for any servicing fees the borrower pays to the platform
- the only thing that should affect this is borrower default and subsequent recovery processes
- an Administrator can only use funds directly attributable to the platform.
Normally there is a servicing fee being paid by the borrower to a platform. Example, the borrower pays 12% and the investors get 10%, then the platform is getting 2% servicing fee. This fee could be used by the administrator to either cover off creditors or to service the loan book. However, the 10% should be protected under 36H.
And this is where the issues of lender Terms come in.
Which terms lenders accept (ie those post 05/03/18 v those terms before) radically changes the 'funds attributable to the platform' as Andrew puts it.
You can bet that the recovery from HQ and Lo****ft , will have already had Lendy funds deducted in the way Lendy decided was fair .. and only the net amounts, if at all, are in the protected client account.
The other issue is what classes of lender, if any, are creditors of Lendy / SSSH. Just owning a loan part does not make a lender a creditor.
RSM in liasion with FCA will need to judge if Lendy and / or SSSH owe lenders a civil liability springing from the conduct of their agency and trusteeship.
A court won't decide that. RSM in liasion with FCA will make that judgement call and that is going to frame the course of the administration.
We'll see.
I am unconvinced that too much weight should be attached to the changing of the terms by Lendy. The imposed revised terms could be argued as so unfair to lenders as to be null and void. If that is or if necessary has to be found to be the case then lenders both pre and post 05/03/18 would effectively be in the same position.
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zlb
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Post by zlb on May 28, 2019 16:46:52 GMT
And this is where the issues of lender Terms come in.
Which terms lenders accept (ie those post 05/03/18 v those terms before) radically changes the 'funds attributable to the platform' as Andrew puts it.
You can bet that the recovery from HQ and Lo****ft , will have already had Lendy funds deducted in the way Lendy decided was fair .. and only the net amounts, if at all, are in the protected client account.
The other issue is what classes of lender, if any, are creditors of Lendy / SSSH. Just owning a loan part does not make a lender a creditor.
RSM in liasion with FCA will need to judge if Lendy and / or SSSH owe lenders a civil liability springing from the conduct of their agency and trusteeship.
A court won't decide that. RSM in liasion with FCA will make that judgement call and that is going to frame the course of the administration.
We'll see.
I am unconvinced that too much weight should be attached to the changing of the terms by Lendy. The imposed revised terms could be argued as so unfair to lenders as to be null and void. If that is or if necessary has to be found to be the case then lenders both pre and post 05/03/18 would effectively be in the same position. is there a valid route through which this would be established, rather than individuals send a letter of refusing the terms? I'm worried about sending the letter and that taking effect, only to find that through some twist yet to be apparent, it would have been better if I hadn't.
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Post by brightspark on May 28, 2019 19:06:51 GMT
It would be big hitters probably testing such matters through actual or threatened legal action that will perhaps bring things to the fore.
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