blender
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Post by blender on Jan 16, 2014 11:38:59 GMT
Sorry to be injecting an air of positivity into the forum, but has anyone else been monitoring the performance of the loans of C- borrowers? They seemed a rather risky punt and I have taken a cautionary approach and assumed that they were good for three repayments.
There are now 170 in place and the earliest are just making their sixth repayment. Only one is 'late', though in reality it is a zombie loan from the early days which made one repayment and has now missed five, but still just late about 150 days - not defaulted, oh no, no, no. But I do not have it, fortunately.
Apart from that, no C- is even late, as of today, and the other approx 145 loans who have made repayments are on schedule. On average they have made a bit less than 3 repayments, and of course they could all fall over a cliff very soon, but at present they look good. Anyone who has been buying C- loans at 11.5% MBR, even blind without perusing the scary financials, will currently be happy with the performance. And they can be sold - today you cannot buy a single C- loan part without a premium.
What's not to like?
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markr
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Post by markr on Jan 16, 2014 11:57:51 GMT
A similar point was made on the old forum about C loans when they were first introduced. A theory was C (and C-) loans are more likely to be to small, maybe family run, concerns whose directors are passionate about their business and have a lot of their own at stake, too, so are less likely to just call in the receivers and make a run for it in bad times. Another theory is that the data set is too small and it's too early to draw any meaningful conclusions.
My concern with C- loans is the tax issue, and maybe they give FC even more excuse to do nothing about defaults (waiting for the first "It was a C-, what do you expect - FC" comment). To be fair though, I do have some of Lo*d Of S**t and FC do seem to have been working on our behalf and we're promised payments again this month.
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blender
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Post by blender on Jan 16, 2014 13:47:42 GMT
Your point about the C loans is valid, markr, but that discussion was I think about defaults, while here I am commenting about the total current absence of any lates (apart from the zombie which is really a default). I am one of those who sell if a loan goes late, other than the first payment, and we would expect to see lates earlier in the C- lifetimes than defaults. Of couse some of the C- have been late and paid up, though I think not many. An analysis on the deserted 'official' board showed a spike of C loans going late after the sixth repayment, and we might expect a spike in lates earlier than that for C-, because their financials are generally less resilient. There is still that possibility of course, because few have made a fifth repayment, but I am just saying that the overall payment performance, judged by a snapshot today in mid-January, is very good.
The point about the dedicated family firms may well be true, and presumably that would also apply to the non-limiteds, but I would not trust to that. They say that for family firms the first generation creates the business, the second keeps it going and the third loses it. I would have confidence in a family firm which is being run by its creator, but not in the descendant who has inherited it, might see it as the family meal ticket, and now finds a loan is needed.
The taxation issue with the C- loans is a potential problem, but only if you have losses. If not, then the MBR ensures a good return. The question is how long to keep them if trying to avoid defaults.
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pikestaff
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Post by pikestaff on Jan 16, 2014 16:05:04 GMT
Pure speculation, but I wonder if the selection process is different and actually involves some intelligent review of the ones that their credit scoring rejects as not good enough for A+ to C?
I know "intelligent" and FC don't necessarily go together...
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Post by yorkshireman on Jan 16, 2014 22:34:18 GMT
I know "intelligent" and FC don't necessarily go together... Why did FC give a firm with a credit score of 15 and barely £200 net assets an A+ rating and then allow them to put in a loan request for a six figure sum with nothing but a director guarantee?
QED
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Post by davee39 on Jan 17, 2014 9:23:01 GMT
Why would anyone take the risk on an A+ at 6%, when RS can offer up to 5.8% with a provision fund?
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Jan 17, 2014 9:54:38 GMT
Your point about the C loans is valid, markr, but that discussion was I think about defaults, while here I am commenting about the total current absence of any lates (apart from the zombie which is really a default). I am one of those who sell if a loan goes late, other than the first payment, and we would expect to see lates earlier in the C- lifetimes than defaults. Of couse some of the C- have been late and paid up, though I think not many. An analysis on the deserted 'official' board showed a spike of C loans going late after the sixth repayment, and we might expect a spike in lates earlier than that for C-, because their financials are generally less resilient. There is still that possibility of course, because few have made a fifth repayment, but I am just saying that the overall payment performance, judged by a snapshot today in mid-January, is very good. The point about the dedicated family firms may well be true, and presumably that would also apply to the non-limiteds, but I would not trust to that. They say that for family firms the first generation creates the business, the second keeps it going and the third loses it. I would have confidence in a family firm which is being run by its creator, but not in the descendant who has inherited it, might see it as the family meal ticket, and now finds a loan is needed. The taxation issue with the C- loans is a potential problem, but only if you have losses. If not, then the MBR ensures a good return. The question is how long to keep them if trying to avoid defaults. Very difficult to gauge the general situation regarding "lates" you may have none but I think I am lucky to get down to only three: 1983, 2454 and 3032. These three have been a constant pain throughout so never get back on the open market otherwise I would dump them like lightning!
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blender
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Post by blender on Jan 17, 2014 13:37:03 GMT
I do have lates and defaults, but not at C-. There is just the one C- zombie loan and no others were late yesterday.
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