COLBB

Hi,

Thanks all for useful discussion. Still a bit puzzled I am afraid.

Loan security details for COLBB items state This item has been underwritten by two of our jewellery trade partners in the event of default by the borrower

Does this underwriting require the partner to buy the item at a price equivalent to the loan amount, or some other amount? How does this fit with Collateral's comment above regarding the risk associated with a crash in a particular asset class? If the full loan amount after deduction of interest is underwritten isn't it the underwriter that is shouldering this risk?

Any further explanation would be appreciated.

Thanks!

For Buy back agreements the underwriters we work with have agreed a price to purchase at the end of the loan term which is the gross amount of the loan (interest due to lenders is deducted as a fee at drawdown). These are agreements in principle should the market conditions remain the same throughout the term of the loan, they are not legally binding.

I'd add to the request for clarification... concerning the use of the word "default".

As I understand it the items have been purchased by Collateral and the sellers have been given an option to buy them back after an agreed length of time.

If the option is not taken up then the item has to be sold to recover the capital. I'm not clear if the trade partners of Collateral have any obligation to buy the item but if not it would have to be sold on the market. Perhaps this could be clarified.

In any event I don’t see how the word default applies in the process.

The Buy Back items have effectively been bought by Collateral but the agreement gives the “seller/borrower” the option to buy back the goods within a period of time for a fee. Collateral cannot sell the items within this period without the consent of the “seller/borrower” as we are both bound by the agreement.

I used the words “redeeming/defaulting” as I was also referring to other asset classes which we are looking to fund such as property where defaulting will be the correct terminology.

Many thanks,

Gordon

Thanks for the clarification, Collateral.  And now for a request....

Can we please start to see which items are from repeat borrowers.  Some items listed earlier were indeed announced elsewhere as being from the same source, and it looks in my opinion as if the three 'big ticket' diamond items all listed today could be from the same borrower.

My perspective is that I am trying to be aware of 'hidden correlations' (there have been some on other platforms!).

Seems to me that the ideal outcome is if a borrower is able to redeem his/her items at the end of a loan period.  But clearly this is not always going to happen and some loans will fall into the sale/underwrite category, leading at least, to delay.  Assuming that a lender acquires, say, parts of 100 loans, which looks very achievable shortly at the current rate of listing, and just one borrower is unable to (or doesn't want to) redeem, are we going to be surprised that perhaps 5, 10, or more of these all cascade into 'unredeemed' in a matter of days? 

At a very minimum easy fix, could an item simply be flagged in the loan description as 'new borrower', please?  Other suggestions welcome!

Otherwise, keep it up Collateral!  Personally I like the niche you are in - I have no interest at this time in yet another platform that ends up focused on 'property'

collateral there have been so many questions on this, I think you should consider changing your wording on the website for this as it's obviously not understandable by all

I also don't think you have explained your system. It sounds like it is a USP, but if you can't concisely explain it to your lenders, its useless. 

Basically then:
- you take the interest up from the borrower?
- you have 2 independent buyers lined up, but this might not happen  if the sale price changes dramatically from the estimate at the start of the loan?

Please just sum it up in a sentence or two at the most

Sorry but what does effectively mean. Does Collateral own them outright?

Hi,

As there are similar questions being asked in different ways, I will arrange for the compliance and legal teams to update the FAQ’s to clarify and satisfy all queries. In the meantime we can assure you that the lenders have full title in case of unredeemed items and all items loaned against are held in safety deposit boxes/vaults on behalf of the lender.

What we do want to make clear is that with our business model of taking all the interest from the borrower at the loan drawdown AND physically taking the goods and storing them in top grade safety deposit boxes and vaults we believe that we are being as risk averse as possible on behalf of lenders.

I hope this helps and I will let you know when the compliance and legal team have updated the FAQs.

Many thanks,

Gordon

Hi All,

I have a question regarding the COLBBs. Should the items default/unredeem, and then collateral sell them to the trade partners at the agreed price (which I see from these threads is the cost/trade price, not the market value), then does that Buy Back cover just our capital or both interest and capital?

Apologies if it has been asked/clarified before.

"Platform loan value" doesn't sound like it includes interest?