littleoldlady
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Post by littleoldlady on Nov 17, 2019 16:22:03 GMT
It's possible to make a lot of money out of p2p. A lot of money!
That's if you are an unscrupulous borrower, a dodgy platform or a vulturous administrator.
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bugs4me
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Post by bugs4me on Nov 17, 2019 23:09:54 GMT
I would have thought, from a layman's knowledge of insolvency law, that if the loans were actually due to the investors with the platform a paid administrator, that the investors would only need to pay for the costs of recoveries. I would hope that even in most insolvent situations that the new administrator would have access to the loanbook in full and that the wind down arrangements should mean that the costs of administrating the loan portfolio should be covered by fees due from borrowers. As a result, of the majority of borrowers pay back, then I don't see why the wind down provisions shouldn't function. Of course this is only likely to be the case for lower risk platforms and not in the most dire of financial disasters. also, there is always the possibility of a platform going bust due to failing to raise finance to cover intended losses while growing to critical mass. Laying off the staff and meeting commitments may well make them insolvent even if the underlying loan portfolio is successful. It's all dependent on the wind-down plan each platform has in place, and we have next to no insight into that. The wind-down plans could be a mess and difficult for any administrator to implement in terms of continuing to get loan repayments from borrowers - be no means an easy task. Likewise, in my considerable experience in such scenarios (admittedly outside of P2P), the administrators' £650 and £750 + VAT an hour fees, multiplied by thousands of hours, mean they end up pocketing much of the lenders' money themselves. (These administrators are so avaricious in lining their own pockets they will even bill for every page they photocopy and won't omit to add 6 pence to their billing for that.) The fact that none of this mission-critical information re: wind-down plan mechanics and billing etc. is disclosed to us means it's purely guesswork whether we will ever get our money back in the case of a platform closing down and, if we do, how many pennies in the pound we're likely to be paid. It's fair to state that the only time a wind-down plan will come into play is when the platform has gone past the point of no return. So it follows that any administrator will have their work cut out managing to sort out the mess. The mess created by numerous defaulted/overdue/unredeemed/etc loans plus no doubt former directors who will, whilst appearing to be co-operative have every intention of 'covering their own backs'.
In the P2P world, we have COL who should not have been trading, FS who were way out of their depth plus more than a couple of conflicting financial arrangements and LY - well say no more otherwise I'd be opening myself up to libel action possibly from you know who.
Top of the pecking order for payments are the administrators. Just look at COL - will be two years since their demise and the next report from BDO in March next year. Does anyone genuinely expect to receive more than a few pennies in the pound average after two years of administration costs for what is a relatively smallish wind-down.
I love the sugar coating wording 'interim payment' giving folks false hope. In the real world yes there may be a little more crumbs to follow but don't bank on it. Administrators can have as many letters after their name as they choose, highly professional folk, etc. In my book they generally fall into the vultures column.
What I do find odd is the silence of other platforms. Are they operating in a bubble genuinely believing that other platform failure(s) will not impact their business. Surely this would be an excellent PR opportunity to distance themselves from the likes of FS and LY. Maybe the odd one here and there is in an unofficial wind-down stage anyway. More than a couple of names spring to mind.
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Post by propman on Nov 18, 2019 10:43:54 GMT
It's all dependent on the wind-down plan each platform has in place, and we have next to no insight into that. The wind-down plans could be a mess and difficult for any administrator to implement in terms of continuing to get loan repayments from borrowers - be no means an easy task. Likewise, in my considerable experience in such scenarios (admittedly outside of P2P), the administrators' £650 and £750 + VAT an hour fees, multiplied by thousands of hours, mean they end up pocketing much of the lenders' money themselves. (These administrators are so avaricious in lining their own pockets they will even bill for every page they photocopy and won't omit to add 6 pence to their billing for that.) The fact that none of this mission-critical information re: wind-down plan mechanics and billing etc. is disclosed to us means it's purely guesswork whether we will ever get our money back in the case of a platform closing down and, if we do, how many pennies in the pound we're likely to be paid. It's fair to state that the only time a wind-down plan will come into play is when the platform has gone past the point of no return. So it follows that any administrator will have their work cut out managing to sort out the mess. The mess created by numerous defaulted/overdue/unredeemed/etc loans plus no doubt former directors who will, whilst appearing to be co-operative have every intention of 'covering their own backs'.
In the P2P world, we have COL who should not have been trading, FS who were way out of their depth plus more than a couple of conflicting financial arrangements and LY - well say no more otherwise I'd be opening myself up to libel action possibly from you know who.
Top of the pecking order for payments are the administrators. Just look at COL - will be two years since their demise and the next report from BDO in March next year. Does anyone genuinely expect to receive more than a few pennies in the pound average after two years of administration costs for what is a relatively smallish wind-down.
I love the sugar coating wording 'interim payment' giving folks false hope. In the real world yes there may be a little more crumbs to follow but don't bank on it. Administrators can have as many letters after their name as they choose, highly professional folk, etc. In my book they generally fall into the vultures column.
What I do find odd is the silence of other platforms. Are they operating in a bubble genuinely believing that other platform failure(s) will not impact their business. Surely this would be an excellent PR opportunity to distance themselves from the likes of FS and LY. Maybe the odd one here and there is in an unofficial wind-down stage anyway. More than a couple of names spring to mind. I disagree that COL is a normal situation for P2P administration. Here they had horrendous costs trying to get info on the loan portfolio and IIRC the loans have been declared an asset of the platform rather than the investors and so recoveries fair game for the administrators. I agree that there are likely to be poor wind up arrangements out there that will not work. but I also think that some might. You have also ignored the distinct category where the portfolio is performing (if not quite as well as hoped), but where the platform cannot be made profitable. We have seen a number of companies winding down without horrendous costs on investors in that situation.
IMO there will be limited opportunities for administrations to take the proceeds from recoveries if the loans are due to investors directly with the platform only an intermediary. As I said above, there is the possibilities for additional charges being levied under the terms and conditions or else portions of loanbooks (perhaps all arears) being sold off at a loss wholesale to reduce the administrators costs. It would be interesting to get others views as to any legal restrictions on wide powers platforms have to do either.
I agree that I think the wind down arrangements should be available to investors to evaluate platform risk.
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on Nov 18, 2019 11:43:59 GMT
propman I fear that you are being optimistic. The costs of recovery where it involves taking control of and disposing of the asset are huge and someone has to pay. The platform will probably have no money and the administrators are not going to bear the costs so that only leaves us.
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rogedavi
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Post by rogedavi on Nov 18, 2019 13:15:44 GMT
So on the £50k which is not currently non-performing, and which you can withdraw if there's a SM with liquidity, you expect to lose £2.5K net after interest? In simple modelling terms, yes. The proportion of loans that default is too high and number of loans that make a full recovery when defaulted is too small for 8-12% interest to cover the capital losses. So on a simple invest and hold basis a loss is inevitable. So ... why wouldn't I sell everything I can at this point and invest in some other asset class ? A very good question, which I can only answer by saying that I would hope to flip that notional £50k several times before it all ends up defaulted, i.e strip out retained/accrued interest and leave someone else the maturity risk (and hence come out with a profit). But, when confidence in a platform is eroded, SM liquidity suffers. A p2p platform with zero losses thus far is probably going to declare its first partial recovery next month (or early January more likely) with all lenders in the loan taking a haircut. It will be interesting to see how that platform's SM responds to that news when it breaks. The last 2 sentences are conjecture or non-public knowledge? Certainly perked my interest
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IFISAcava
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Post by IFISAcava on Nov 18, 2019 13:23:25 GMT
In simple modelling terms, yes. The proportion of loans that default is too high and number of loans that make a full recovery when defaulted is too small for 8-12% interest to cover the capital losses. So on a simple invest and hold basis a loss is inevitable. So ... why wouldn't I sell everything I can at this point and invest in some other asset class ? A very good question, which I can only answer by saying that I would hope to flip that notional £50k several times before it all ends up defaulted, i.e strip out retained/accrued interest and leave someone else the maturity risk (and hence come out with a profit). But, when confidence in a platform is eroded, SM liquidity suffers. A p2p platform with zero losses thus far is probably going to declare its first partial recovery next month (or early January more likely) with all lenders in the loan taking a haircut. It will be interesting to see how that platform's SM responds to that news when it breaks. The last 2 sentences are conjecture or non-public knowledge? Certainly perked my interest Mine too PL?
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Post by mrclondon on Nov 18, 2019 13:27:36 GMT
The last 2 sentences are conjecture or non-public knowledge? Certainly perked my interest The secured asset is due to be auctioned early December, guide price c. 50% of VR and significantly below the loan value. So yes, conjecture, but probability of anything other than a capital loss is so small that it can be ignored (the PG even if anything is realised from it is capped at a relatively small amount and will do little to plug the gap). Clearly knowledge that is in the public domain - auctions do need to advertise in advance.
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Post by propman on Nov 19, 2019 12:08:24 GMT
propman I fear that you are being optimistic. The costs of recovery where it involves taking control of and disposing of the asset are huge and someone has to pay. The platform will probably have no money and the administrators are not going to bear the costs so that only leaves us. In many cases I am sure I am being over optimistic, but assets vary! Of course the disposal proceeds of an asset are first taken by the asset value so this reduces the proceeds available to repay the loan. Also depends on the creditor, if they are not insolvent then they can also be chased.
A run off plan that provides no resources to chase debts would not be compliant with the rules. I am sure you are right that this may prove to be the case for some, but others (especially any that see the writing on the wall and wind down before forced) will have considered this, even if the amount turns out to be insufficient in a down turn.
I can certainly see backers pulling out and forcing platforms to wind down rather than only where bad debts have left them with insufficient investors on the platform.
In short I think that the lower risk platforms are likely to have some resources to help that are unlikely to be there for higher risk ones. Extracating yourself from a series of development loans in a downturn is expensive, passing on largely serviced consumer loans very different.
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