baldpate
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Post by baldpate on Jun 3, 2016 19:24:01 GMT
I've just read the Information Pack provided by the sponsor of this loan series, and I am hoping that somebody on this forum can explain the meaning of the bit at the beginning of the "Sponsors Report" section on page 5 - that is the first three paragraphs from "In April 2016 ..." to "ten loans of £50,000 each." - because I don't understand it.
For another thing, to whom are we lending? Page 3 of the Information Pack identifies the ULTIMATE BORROWER (my bolding). Does this mean that there is an intermediate borrower? Is this the FMF subsidiary mentioned in the three paras at the top of page 5?
Basically, I'm confused by the who's who of this loan series. Can anybody please explain.
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on Jun 3, 2016 21:33:20 GMT
The LTV is based on the value of the premises on a closed basis. Given that Harry Rumsden is (or was) interested in buying the business IMO it is unlikely that it would need to be sold on a closed basis. In the event of the business failing and being taken over by Harry Rumsden he would only need minimum expenditure to rebrand it - indeed he might even continue to operate the business under the P**** brand. This appears to be one of the safest loans on any platform IMO, and justifies the slightly lower rate of interest. But if I am missing something then please enlighten me.
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Post by mrclondon on Jun 3, 2016 22:37:09 GMT
baldpate
The borrower of our funds is F M F (S 2) Ltd which is wholly owned by F M F Ltd.
F M F Ltd is a specialist provider of finance to the restaurant sector, primarily focused on central London. A couple of months ago they provided funding to P Restaurants in return for first charges on the four P restaurants. They now wish to free up their capital to make further loans (similar to CS / AE etc ) by getting MT lenders involved.
Presumably to make the accounts easier and possibly the security assignments easier as well F M F Ltd have assigned the P Restaurants loan and first charge security into a subsidiary F M F (S 2) Ltd, and subsequently then assigned the security to MT in return for the £500k.
So just as our loans to CS against security from previously written CS loans are to boost the CS cashflow to allow them to make new loans to their borrowers, here our loan to F M F (S 2) Ltd is against security from a previously written F M F Ltd loan which will allow F M F Ltd to make more loans to their borrowers.
P Restaurants are renowned in London, and consistently receive good reviews and a significant amount of media coverage.
Looking at the four valuation reports it would be a reasonable guess that the funds were required by P Restaurants to acquire the lease and fit out their new Soho location. All 4 locations are first class, and its worth noting that they also have a pop up stall on Camden Market which has a pretty brill food court that is packed solid every weekend year round. Their County Hall location is close to family orientated attractions, the Spitalfields location is popular with city workers at lunchtimes. There is also a pop-up stall in Spitalfields Market, although I haven't visited the food court there for probably 15 years.
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baldpate
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Post by baldpate on Jun 4, 2016 7:56:47 GMT
mrclondon : thank you very much indeed for that explanation (particularly the analogy with the CS/AE arrangements) - it makes the whole deal a lot clearer for me.
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ben
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Post by ben on Jun 4, 2016 9:41:31 GMT
Had a quick look at the report, it states that a further loan will probably be required will MT be providing that to or somebody else?
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Post by bracknellboy on Jun 4, 2016 9:48:04 GMT
mrclondon: you are obviously seeing clarity where I am not. I looked at this last night and had similar set of questions. I am either not reading the IP correctly or it appears to me to be confused. - I think it's clear we are lending to a new wholly owned subsidiary of the original lender, with the sub holding both the loan and security - However the IP then goes on to talk (in normal F&P glowing terms) about the restaurant business, and says 'funds are required for it to continue with this expansion'. Uhhh ? So is it borrowing additional on top of current borrowings to achieve that ? - no mention is made of the purpose for which F*F themselves are re-financing the loan (one can presume it's to free up capital to lend on other projects) - presumably the original loan to the borrower will be at a higher rate allowing F*F to continue taking some profit from the deal ? - much is made of the profitability and cash generative nature of the restaurant businesses: but the IP Is very light on detail: If F&P had listed this on ANO platform there would be reams of accounts and forecasts to back this assertion up. - whereas we are not presented with the financials of either the end business, nor the expected financials of the entity we are actually lending to. As far as I can tell, the loans are not being assigned to MT: we do therefore have an interest in the actual entity we are lending to; unless of course one takes the view that all that matters is the security. I think this is probably a good proposition, but I don't feel it has been presented very cleanly/transparently. And that makes me more twitchy than perhaps it should.
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Post by MoneyThing on Jun 4, 2016 11:04:22 GMT
Morning bracknellboy,
A few comments:
1) F*F have assigned the security in its entirety over to MT. They have refinanced the loan so that they can free up capital to lend on other deals. (F*F still make a margin).
2) MT as you are aware is a purely asset-backed lender and not in the SME lending space like the other platform F&P deal with. When launching the B******s, we received quite a bit of feedback from lenders who asked whether they needed to start getting their heads around a set of financials to be able to ascertain the quality of loans on offer rather than the straight forward LTV aspect of the hard assets and simple propositions they were used to with us.
As such, whilst the lenders of the other platform have come to expect to see the financials on the borrower as a significant amount of their loan book is SME lending, I made the decision that on this occasion, since we were only looking at lending against the bricks & mortar valuation of the properties (i.e. the closed basis valuation), adding in the financials would add little value and may potentially confuse matters for some.
We could easily add all the financials into the listing, however I would ideally like to steer away from doing this as standard practice. We only look at F&P introduced deals which are asset-backed with appropriate LTVs as per our standard offerings and like our standard offerings we would not ordinarily show the financials of the business (or often even disclose who the borrower is at all).
Kind regards,
Ed
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Post by mrclondon on Jun 4, 2016 11:24:45 GMT
bracknellboy - the valuation reports (section 5 of each) do contain very high level financials for each location of turnover and EBITA.
Re-reading the valuation reports this morning, a few more observations:
- the County Hall location is operated under a different brand name (not P********) given its lower quality menu (frozen fish not fresh) and correspondingly lower prices.
- the fit out costs of the new Soho location are budgeted at £750k (which is presumably where the loan proceeds have been spent) but the lease has only 8 years remaining, so several hundred thousand will be required in the not too distant future to extend it. (Which may explain the comment re an additional loan in the future)
MoneyThing it might help if you clarified what would happen if FMF Ltd ceased trading, which I think was one of the underlying concerns of bracknellboy . The restaurant sector even in prime central London is well known for business failures, and FMF Ltd as a specialist financier to the sector intuitively runs a higher than average risk of bad debts for that style of finance provider.
I should add FMF Ltd and other subsidiaries are borrowers on TC so are not an unknown to the p2p sector. I'm in the FMF Ltd loan on TC and there have been no repayment issues in the 18 months since drawdown
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Post by bracknellboy on Jun 4, 2016 11:40:45 GMT
What makes me nervous is a certain tension over the security. On the one hand, the restaurant has offered the security to FMF to support their borrowing from FMF. But on the other hand, FMF offer us the same security for their borrowing from MT. If the restaurant pays off the loan or takes it out with another lender, surely FMF will no longer have the security and MT will be left with a completely unsecured £0.5M loan to FMF. Or are there cross guarantees I'm not spotting ? again I may be wrong, but I saw no debenture on the F*F sub and no mention of cross guarantees when I read it. Which also raised a question in my mind as to why F*F have put this into a separate sub in the first place.
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Post by bracknellboy on Jun 4, 2016 14:03:41 GMT
along similar lines with regard to the structure. Again, I'm sure this is all battened down but would like to understand how.
The loans continue to belong to the middleman F*F (well, the sub). We have the charge over the security. But I don't /think/ there is any assignment of payments against the end loan in favour of MT. What is to stop a scenario whereby their borrower (hence forth to be known as P***) pays our borrower some large lump sum to reduce the loan, but that is not then passed on to MT. Those monies could be used by the borrower for other purposes, including payments to its parent. Subsequently our borrower F*F goes pop. While we would hold the security, surely P*** would be able to argue that the security could not be used to recover monies it had paid to F*F but which had not been passed on ?
I must be missing something here. Or maybe there is an assignment of any payments from P*** to MT, with MT then paying F*F any balance.
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Post by MoneyThing on Jun 4, 2016 14:31:50 GMT
Afternoon,
Please see below points:
· F*F Plc made a loan of £1.5 million to P****** on 1 April 2016 (the security for this loan is as described in the information pack).
· F*F Plc have novated that loan to F*F (S*** 2) Ltd together with security attaching thereto.
· MT has lent an initial £500k to F*F (S*** 2) Ltd, (being 10 x £50,000 loans) taking the loan due from P****** as security and the benefit of the underlying security attaching to the loan as well i.e. the properties.
· MT has a sole debenture over F*F (S*** 2) Ltd, meaning if anything ever happened to F*F, MT can take control of F*F (S*** 2) Ltd in receiving the monies and the debt due from Poppies.
· The MT loan does also benefit from the corporate guarantee of F*F Plc.
Kind regards,
Ed
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Post by bracknellboy on Jun 4, 2016 16:56:43 GMT
MoneyThing: Ed, thanks for the clarifications. That answers a number of points which Unless I'm mistaken are not fully explained/covered/contradicted by omission in the provided documentation. Can I suggest that the loan details need updating on the website. Particularly: · MT has lent an initial £500k to F*F (S*** 2) Ltd, (being 10 x £50,000 loans) taking the loan due from P****** as security and the benefit of the underlying security attaching to the loan as well i.e. the properties.
Nowhere in the IP nor in the description does it make it clear that the loan has been taken as security. Indeed by mentioning that the underlying security has been taken but omitting to mention the loan iteself it would suggest it had not been (even if in practise the only way P*** might agree to have the first charge holder changed would be if the loan moved as well). · MT has a sole debenture over F*F (S*** 2) Ltd, meaning if anything ever happened to F*F, MT can take control of F*F (S*** 2) Ltd in receiving the monies and the debt due from Poppies.
The debenture is not mentioned, unless I have misread. · The MT loan does also benefit from the corporate guarantee of F*F Plc.
Also not mentioned, I think.
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shimself
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Post by shimself on Jun 4, 2016 17:51:46 GMT
So MT can we have something in writing that if the ultimate borrower P***** redeems the loan with FMF then our loan will also be redeemed (this might be implied but I can't see it stated unambiguously)
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Post by MoneyThing on Jun 4, 2016 19:36:13 GMT
Evening,
Thank you for all the feedback. Particulars have now been updated accordingly.
Regards,
Ed
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jonah
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Post by jonah on Jun 5, 2016 8:36:49 GMT
Hello MoneyThing the details mention another 450k potential loan ( I assume in smaller tranches) in 1-2 weeks time. Do you know the likely length of the terms for those? |
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