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Post by bengilbert on Sept 5, 2016 13:52:58 GMT
We're getting close to completion on a sizeable loan, some of which will be offered on MoneyThing. We'll provide more details shortly, but the outline is: loan secured on a residential development close to completion with most flats presold and substantial deposits taken, LTV around 66% against the current valuation, redemption from the proceeds of sales once the development is completed (expected by the end of January 2017).
Although Broadoak will have a first and only charge on the security, we're thinking about offering it in 2 tranches on MoneyThing, a lower risk tranche A and a higher risk tranche B ranking behind tranche A. LTV on tranche A might be 44% with tranche B making up the balance to 66%, and the interest rates might be 10% on tranche A and 13% on tranche B. Broadoak would as always be investing 5% of the loan on a first loss basis (subordinated behind both tranches). The two tranches would make it easier for investors to find something that best matches the risk and return profile they want (some looking for low LTV, others for a higher yield). Anyone who just wants it as a straight 66% LTV loan can simply invest in both tranches (with a 2:1 ratio between tranche A and tranche B, giving 11% yield).
Is this something you'd like to see? Anything you'd like us to take into consideration if we go ahead with this?
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SteveT
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Post by SteveT on Sept 5, 2016 14:12:36 GMT
In principle, yes. The relative balance of LTV and % rate feels about right to me, on the basis that I'm unsure which I'd go for as yet  [crossed with hoy] |
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Post by geraldine1210 on Sept 5, 2016 14:31:03 GMT
As the others have said, sounds a good idea and I would be up for it.
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littonowl
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Post by littonowl on Sept 5, 2016 14:44:19 GMT
bengilbert , aside from being an active P2X lender and on a personal note I have taken time to read a number of your postings and engagements with Money Thing lenders and have to say that I find your whole approach to be a credit to you personally and to the way in which you do business; refreshing would be an apt description. Money Thing and it's loyal lenders must surely be proud to have you with them, nurturing your relationship with them will serve your Business very well in the times that lie ahead. Others may try and entice you away with fine promises however Ben I reckon loyalty is centrally important to all things worthy of respect and relationships born of mutual respect, crucial to everyone. *I like your idea of Risk Splitting, it's a fine concept Ben and one that may have a broad appeal. Best regards. Echo the thoughts of magenta... Likewise think its a nice idea, Ben (though in common with others, I'll need to give it some thought as to which I'd go for!).
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j
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Post by j on Sept 5, 2016 14:57:14 GMT
Ditto to all the above posts. What loan size are we looking on both tranches? It might go a little towards plugging the current lack of loans.
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Post by mrclondon on Sept 5, 2016 14:57:17 GMT
Its an approach that has worked well on TC, and has enabled me to invest in loans I would have otherwise skipped as the overall LTV is frequently 100% or more of current valuation. Bizarrely even at such LTVs the higher rated / higher risk tranches tend to sell out first.
Whether it is really worthwhile for a 66% LTV loan is a mute point. The description "a residential development close to completion with most flats presold and substantial deposits taken" tends to imply this is a relatively low risk opportunity even before the 66% LTV and 5% first loss are taken into account. 13% seems over priced even on an effective second charge basis, so I would expect the B tranche to disappear quickly. The question is the extent to which 10% will drive take up of the A tranche vs 11% for a single tranche.
Close to completion implies weather tight, so the chances of major slippage to completeion timescales should be minimal.
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ali
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Post by ali on Sept 5, 2016 15:01:08 GMT
Whether it is really worthwhile for a 66% LTV loan is a mute point. The description "a residential development close to completion with most flats presold and substantial deposits taken" tends to imply this is a relatively low risk opportunity even before the 66% LTV and 5% first loss are taken into account. 13% seems over priced even on an effective second charge basis, so I would expect the B tranche to disappear quickly. The question is the extent to which 10% will drive take up of the A tranche vs 11% fro a single tranche. Yes, on this one I would go all in for B if allocation allows. But I'd be quite happy to top up with A if needed. Seems like a good idea. I note LI does something similar and their loans also tend to be on the low risk end of the spectrum.
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Post by reeknralf on Sept 5, 2016 17:20:45 GMT
Whether it is really worthwhile for a 66% LTV loan is a mute point. If it had been a contributor of lesser standing, I'd have let it pass, but really mrclondon, a mute point.
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ramblin rose
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Post by ramblin rose on Sept 5, 2016 17:46:20 GMT
It's certainly of appeal to me; speaking in my capacity as Risky Rose, who also helps an elderly relative with her much more risk-averse account, it would suit both of my needs very well. Great idea.
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littleoldlady
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Post by littleoldlady on Sept 5, 2016 18:29:33 GMT
Whether it is really worthwhile for a 66% LTV loan is a mute point. If it had been a contributor of lesser standing, I'd have let it pass, but really mrclondon , a mute point. I shall stay silent about that. Back on topic, yes I would like some and I would probably split my invest between the two.
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Post by GSV3MIaC on Sept 5, 2016 18:30:30 GMT
Yes, I'd go for some too .. maybe not a 50/50 or 33/66 mix, but definitely =some=. (and I'm sure mrclondon knows very well it's a MOOT point, but his predictive speech-to-text-avoiding-all-taxes itoy (or whatever) may not. 8>. |
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TitoPuente
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Post by TitoPuente on Sept 5, 2016 20:00:39 GMT
The risk differentiation makes sense, but given the usual overvaluation, the second tranche should be in the 14%-15% range. In the case of a default, recovery on the second tranche will likely be low.
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SteveT
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Post by SteveT on Sept 5, 2016 20:20:46 GMT
The risk differentiation makes sense, but given the usual overvaluation, the second tranche should be in the 14%-15% range. In the case of a default, recovery on the second tranche will likely be low. I guess you'll be going for the 10% tranche then 😉
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registerme
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Post by registerme on Sept 5, 2016 20:53:50 GMT
Basically I like the idea (but I think pricing might be interesting.....). Two questions:-
1. What would you do if demand is skewed heavily one way or the other?
2. It's quite short term, leave aside mrc's comments about it presumably being weather proofed and so actually close to completion what happens if something blows up out of nowhere and causes say a two month delay (eg ~40% of the originally expected loan term)? Here I'm thinking more about project risk than financial risk. Would you apply penalty rates? Would they be the same, or differ by tranche?
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Post by bengilbert on Sept 5, 2016 21:20:23 GMT
Thanks very much for all the comments, we'll take them all on board. I realise that the discussion can only be rather vague until you've had details of the specific loan, but I'm glad that generally people like the idea. We'll come back with more information once we're closing in on completion of the loan.
Appreciate you taking the time to give your views.
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