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Post by Collateral Rep on Sept 28, 2016 11:58:16 GMT
Hi,
From all loan listings...........
This loan is via a Buy Back Agreement (COLBB) whereby Collateral agrees to buy the goods from the client at a set price and gives the client the option to ‘buy back’ the goods within a set period of time, (in this case 6 months) at an agreed ‘buy back’ price. This is the original purchase price plus a buy back fee, which equates to a monthly interest rate. The 6 months interest payments (the Buy Back fee) have been deducted upfront from the loan, to ensure the LTV doesn’t increase during the lifetime of the loan.
Thanks,
Gordon
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arbster
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Post by arbster on Sept 28, 2016 12:10:28 GMT
Thanks - being naturally cautious I've not yet signed up to Collateral and haven't seen the loan listings.
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elliotn
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Post by elliotn on Dec 20, 2016 4:34:28 GMT
I wanted to bump this for any other newbies trying to understand the risks as it clarifies some key points that may not be immediate from Collateral's FAQ/T&C. This looks at jewellery but Collateral aim to roll out similar models for other asset classes.
Lending model:
- 'purchase price' in the buy back agreements is the loan value drawn down by the borrower (ex deducted interest which becomes the buy back fee) ie it is not the most recent purchase or retail price; - a buy back agreement allows Collateral to re-sell the item on Day 1 after the loan has completed/not been redeemed; - additional interest has to be pre-paid for an extension; - the item value is appraised by jewellers/trade dealers/collectors prior to agreeing the loan value; - these trade partners (the panel) agree to buy at this value in a non-binding agreement (this is our capital element, the interest is held on client money account and released monthly); - individual valuables are insured and held in Collateral's own safety deposit boxes in Manchester and Chancery Lane, London; - assets are funded first by Collateral and then underlying title/legal rights are assigned to lenders upon purchase of loan parts.
Risks:
- gold/gem prices are not hedged (ltv headroom is relied on to maintain re-sale value); - 'underwriting' partners (if still trading) are not obliged to buy unredeemed items; - valuations are provided by Collateral's own partners/wholesalers/retailers; - grouped jewellery assets may be available for sale by the borrower so fixed charges must be up to date to protect lenders' title.
The 'trust' elements in this model are primarily around lack of valuation documents, valuations by potentially interested parties ie prospective buyers or even anonymous borrowers(?) - and reliance on underwriting partners keeping their word.
I'm less than half way through the threads so welcome any addition/qualification to the above understanding, thanks.
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nick
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Post by nick on Jan 19, 2017 11:22:54 GMT
collateral Rep I'm trying to understand the underlying risk of lending against assets under a Buy Back Agreement ("COLBB"). I have read the FAQs and Terms and Conditions on the website, but they do not appear to address these transactions. If I understand correctly, where amounts are lent to a "borrower" under COLBB, Collateral (UK) Ltd ("Collateral") legally purchase the asset. Whilst the borrower has an option to repurchase the asset (and it assumed that they will exercise that right given the economics of the transaction), they have no obligation to do so. Under these circumstances, aren't lenders directly lending to Collateral and not the "borrower" and thus exposed to Collateral's credit? In these circumstances, in the event of Collateral defaulting/failing, wouldn't lenders be left as unsecured creditors of Collateral? What, if any, legal structure is in place to ensure that lenders have specific recourse to the relevant asset under the COLBB, eg are there any back-to-back agreements between Collateral and Collateral Security Holdings ("CSH") placing the assets in trust for the benefit of lenders and that ring fence the assets from Collateral's control/balance sheet?
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Post by Collateral Rep on Jan 20, 2017 8:21:15 GMT
Hi nick, The BB agreements are Assignment of Chattels agreements whereby the seller (borrower) agrees to assign the goods to Collateral on behalf of the buyer (lender). Lenders are lending directly to borrowers, the Platform is the conduit to enable this to happen. These agreements have been written by our lawyers who are currently also updating our T&C’s to clarify the structure. Thanks
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