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Post by bengilbert on Sept 28, 2016 19:26:39 GMT
Evening, Pipeline updated (at the top of the thread). Kind regards, Ed Are 64 and 65 the same thing but different amounts and timing? Puzzled about the deferral of one but the other being soon? Yes, the same thing really. The borrower is making regular drawdowns against the costs of continuing the development, and the c.£500,000 drawdown in the next week is one of those. They also need to make a one-off larger drawdown of £1,300,000, with these funds to go into an escrow account and used for further build costs - doing this by mid-October was a condition of acquiring the lease from the freeholder, who wanted to ensure there were funds available to complete the build to a satisfactory condition. We'd thought they would be drawing it before the end of September but it will be a bit later, in mid-October.
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Post by bengilbert on Sept 27, 2016 13:16:29 GMT
Ref: B******l Road, Sandbanks (BPF373 & 383) There’s a hint of a possible (3 month) extension, any more information available? Apologies - I missed this when posted a couple of days ago. The borrowers have asked for a 6 month extension and we'll be granting this. However, if any investors wish to exit on the original redemption date, we'll purchase any holdings that people want to sell out of. I think this is going to be structured as a rollover so new investors will be able to buy parts from investors who wish to exit, but if there is any shortfall, we'll make up the difference to make sure people can exit if they wish.
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Post by bengilbert on Sept 27, 2016 9:00:30 GMT
bengilbert When this new Birkenhead tranche goes live we will have 2 Tranche A and 2 Tranche B. For the avoidance of doubt can you confirm that both Tranche As rank pari passu and that both Tranche Bs also rank pari passu but behind all Tranche As available now and in the future. Ie the order is (T1 A and T2 A ....) then (T1 B and T2 B ...) NOT T1 A then T1 B then T2 A then T2 B ... Yes, I can confirm that this is correct. All Tranche As will rank pari passu with one another, and ahead of all tranche Bs. All tranche Bs will rank pari passu with one another, and behind all tranche As.
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Post by bengilbert on Sept 27, 2016 8:58:43 GMT
Thanks bengilbert , so was the LTV a maximum LTV or has the LTV increased between drawdowns for the additional amount loaned? My understanding is that some of the non-MT loan has been re-allocated to MT, and the overall amount being advanced to the borrower remains the same at this time. Correct. This is just a re-allocation of an investment from one of our other investors to MoneyThing. No new money has been loaned, and so the loan amount and LTVs have not changed.
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Post by bengilbert on Sept 26, 2016 21:34:48 GMT
Haven't had chance to read the details on MT, but how does the new tranches work with the currently available tranches? Maybe to avoid getting mixed up, let's call this a new drawdown, split into 2 tranches, like the first one. Tranche A on this drawdown is pari passu with tranche A on the first drawdown, and the same for tranche B. So both tranche As have the same LTV etc.
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Post by bengilbert on Sept 23, 2016 12:08:55 GMT
Which begs the question Why? Are BPF's loans really that much riskier than LI's or is it just the size of the loans? LI loans are generally considered lower risk, for example there is a current loan on a commercial property of £700k over 11 months at 6.5% with 50% LTV. I think that LI rates are usually about 12% to the borrower rather than the 18% (?) on the BPF loans. Oh, and of course LI are too big to fail... Just a point of information - the great majority of our borrowers are paying well under 18% pa.
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Post by bengilbert on Sept 21, 2016 15:33:22 GMT
One final question bengilbert . What is the status of the 25% deposits that have been taken, and if there are related charges against the development, where do they rank with respect to this drawdown? Sorry to answer this a bit late. The deposits are part of the contracts between the purchasers and the borrowers, and by lending with knowledge that they exist, we have effectively consented to them. Should we or a receiver have to step in to deal with the property, we would have to honour those contracts, which include the commitment to sell the properties at the agreed price after deducting the deposits. The deposits don't form additional charges on the property, but we are obliged to fulfil the terms of the contract.
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Post by bengilbert on Sept 21, 2016 8:40:21 GMT
Thanks bengilbert - I understand. Essentially the presence of Tranche B has a disproportionate effect on the LTV of Tranche A, acting as an effective second loss facility. Just as a further example of my paranoia - is this reflected in any legal agreements, given that both tranches are secured against the same first charge, or is the documentation on MoneyThing considered sufficient to be binding in the event of a recovery? If the loan went into recovery, MT would receive its payments in accordance with its share of the first charge, with no reference to tranche A and B (which are internal to MT). How these are distributed are a matter for MT but my understanding is that MT provides for investors to be ranked by priority (this is how the Broadoak first loss investments can be ranked behind lenders - our investments are made via the platform and held on platform, so MT controls how they are repaid to us). So tranche B would be ranked behind tranche A. Perhaps Ed can confirm.
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Post by bengilbert on Sept 21, 2016 8:12:07 GMT
thanks bengilbert I note the laon details state 'Further drawdowns up to a total of £600,000 may be granted, but the combined LTV for MoneyThing investors will be capped at 69% throughout the course of the loan.' How will further drawdowns rank? As per other persons comments, could you please provide the calculation for the LTV's provided? Also I note you have used the 'current market value' valuation of £4m. Is this realistic should the loan default and would the 'forced sale' valuation not be a more realistic figure? LTV calculations are above, but please let me know if there are any queries about them. Further drawdowns will rank equally with the initial loan, subject to the MT lender LTV (on A & B combined) against the most recent valuation received remaining at 69% or under. If any drawdowns would take the LTV over 69%, they will be funded by Broadoak and subordinated behind MT to keep the lender LTV to 69%. On all our loans, we express the LTV with reference to the open market valuation. I think this is the case with other loans on the platform, and I'm not sure there are any platforms that use the forced sale value in their headline LTV (happy to be corrected) - in fact, sometimes they use GDV, or initial LTV even when they know it's likely to rise during the course of the loan. So, for consistency and comparability, we use the open market value. But I do agree that it's important to look at the forced sale value as part of evaluating the security.
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Post by bengilbert on Sept 21, 2016 7:54:02 GMT
MoneyThing or bengilbert : Could you please help me understand the LTV calculation for Tranche A? I can't quite get my head around it, and I suspect it may just be the complexities of the BO first loss amount, or something. Working on the basis that there is a separate £1,700,000 facility which ranks equally, and ignoring Tranche B as it ranks behind this, I make that a total of £2,300,000 against a £4,000,000 asset. Which would be 57.5% LTV, ignoring the BO first loss, or 54.6% taking it into account (assuming BO take 5% of the total facility). The text on the site suggests the initial lender LTV for Tranche A is 41.2%. Where am I going wrong? The key point is that our first loss holding is only there to protect MT's investment. It doesn't cover the other investors. And the tranche A / tranche B division is only internal to the MT portion of the investment. Tranche B does not rank behind other (non-MT) investors in the loan, it's just about how funds are allocated between the different investors on MT. So actually, the calculation is as follows: Tranche A LTV: 570,000 / (4,000,000 * 900,000 / 2,600,000) = 41.2% 570,000 = the amount investors will have in tranche A (after deducting BPF's first loss holding of 30,000 in this tranche) 4,000,000 * 900,000 / 2,600,000 = MT's portion of the security (having 900,000 out of a total loan of 2,600,000) Combined A & B LTV: 855,000 / (4,000,000 * 900,000 / 2,600,000) = 61.8% 855,000 = the amount investors will have in both tranches (after deducting BPF's first loss holding of 45,000) Hope this makes things clearer but please let me know if you're still unsure about anything.
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Post by bengilbert on Sept 20, 2016 14:42:57 GMT
We've had some questions about where MoneyThing ranks relative to our other investors in this loan.
MoneyThing's total investment ranks equally with the other investors. MoneyThing has £900,000 out of a total loan of £2,600,000, so will receive (9/26) of the proceeds of any repayments. Within MoneyThing's holding, there are the 2 tranches, with tranche A ranking ahead of tranche B. However, this only affects the order in which MoneyThing investors would be repaid any sums received on the loan - it's just internal to MoneyThing. MoneyThing's total holding is pari passu with all the others.
Also, to be clear, Broadoak holds a first and only charge over the property.
Example:
-loan defaults and £2,000,000 is recovered. -MoneyThing receives (2,000,000 * 9 / 26) = £692,308 -of this, £600,000 goes to tranche A holders (who are repaid in full), and the £92,308 remaining goes to tranche B holders
Sorry - we could have made this clearer in the description and will do our best to do so going forward.
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Post by bengilbert on Sept 20, 2016 14:00:28 GMT
There appears to be considerable enthusiasm for this loan, which I think I share, but there is a gem of a comment in the surveyor's report as follows: "This is a fixed price JCT and we are advised and assume that the project was, until 2 weeks ago, when principal works ceased, on target and budget. We recommend that you ensure that there is sufficient Memorandum of Step-in Rights to allow yourselves, as Funders, or appointed Law of Property Act Receivers to take over the role of owner / Developer in a “distressed scenario” in that you will be able to enforce the Contract and completion of the works". Doesn't mean a great deal to me, but presumably the valuation is based on the assumption that there will be no problem, practically or financially, in taking over funding of the development contract. Does anyone have the expertise to comment? Could MoneyThing or bengilbert comment on this please, and on "50 week project, ending mid December 2016; however, this will obviously be extended by the number of weeks between week ending 25th July and recommencement of full funding cash flow." We do indeed have step-in rights which would allow us to take over the contract. The previous funder did not fulfill the terms of their agreement and failed to provide timely drawdowns, which delayed the works since the borrower was unable to pay contractors on time. This is a primary reason why they refinanced with us.
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Post by bengilbert on Sept 20, 2016 8:55:58 GMT
bengilbert
Total Liverpool loan at outset = 2.6m MT funding = 0.9m In event of default that recovers 1.3m i.e. half, I assume that this is pari passu with MT’s tranches and that means 0.45m is available for payment of the 2 MT tranches and 0.85m for the other funding partners.
Is this assumption correct.
Ignore, same question as stevio It was correct.
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Post by bengilbert on Sept 20, 2016 8:48:59 GMT
MoneyThing bengilbert The loan states 'Total loan at first drawdown is £2.6 million, of which £900,000 is being made available to MT investors, with the remainder funded by BOs other funding partners' There appears to be another £1.7m in this loan. Where will 'BO's other funding partners' rank in the loan, before or after MT? MT will rank equally with other investors.
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Post by bengilbert on Sept 19, 2016 21:12:50 GMT
MoneyThing , any bid limits on the Birkenhead loans? Thanks Ed discussed this with me and we thought that, given the size of the loan and as we're not yet sure what the response will be to the tranches, we'd not have a bid limit. However, should there be strong demand and some people feel they have missed out, MT will be able to increase the portion of the loan it's funding, and launch a further drawdown in the next few days including a maximum bid size to give more investors a chance to invest.
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