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Post by ablrateandy on Feb 23, 2015 13:13:11 GMT
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General P2x Discussion
Risks
Feb 22, 2015 21:05:41 GMT
Post by ablrateandy on Feb 22, 2015 21:05:41 GMT
haha. Yes. Risk is to a large extent a guess about how a borrower will behave in the future, although the longer your track history and the longer your data, the more likely you are to "guess" well. As someone above pointed out, Zopa has been going longer than most and so probably has the best data, but I still don't believe that even they have seen a real "economic cycle", because they haven't seen an increase in interest rates yet, which will be the true test for most platforms... but they may not come for years! (No disrespect to Zopa ) . As observed, secured vs unsecured is totally mispriced and that is largely because of the demand/supply imbalance.
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General P2x Discussion
Risks
Feb 22, 2015 19:23:20 GMT
Post by ablrateandy on Feb 22, 2015 19:23:20 GMT
IMHO.... Interest rates only correlate to risk in a perfect market, which is far from what P2P or P2B is. If you had just one platform in a perfect market, then : Rate of Risk Band A should equal Rate of Risk Band B minus Defaults in Risk Band B Rate of Risk Band A should equal Rate of Risk Band C minus Defaults in Risk Band C The only exception is that you should get fractionally more of a return to cover your expenses of administrating those defaults. In my opinion, any platform which states that you will get a better return from investing in Risk Band D because the level of defaults < difference in interest rates is not doing their credit work correctly. In fact, they are probably guessing. Possibly guessing with the help of a computer model.... but still guessing. At the moment, rates are getting pushed lower because there are more buyers of loans than there are sellers of loans, which means that interest rates on those platforms fall. My advice would simply be to make sure that you think about what value you put on the risk, not the value that someone else (or even "the market" puts on it).
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General P2x Discussion
Risks
Feb 20, 2015 23:44:00 GMT
shimself likes this
Post by ablrateandy on Feb 20, 2015 23:44:00 GMT
Security Breach on the platform - unauthorised withdrawal being made in your name or loan parts or cash being transferred out of your account by a malicious hacker.
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General P2x Discussion
Risks
Feb 20, 2015 12:11:34 GMT
Post by ablrateandy on Feb 20, 2015 12:11:34 GMT
Individual loan scam - where a loan has been passed through by a platform and due diligence has not been correctly performed.
Valuation Risk (secured assets) - where the valuation is incorrect or overly optimistic.
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Post by ablrateandy on Feb 20, 2015 0:53:34 GMT
How about some amusing penguins instead?
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Post by ablrateandy on Feb 17, 2015 19:17:44 GMT
Thanks mike for looking again. I am very happy to show a full cashflow prediction etc offline if you mail me (not sure if I can post an email on this board but you can find me on our site and my e-mail is andy dot lastname at ablrate dot com . We model up valuations based on the Ascend HLBV, an interpolation of their market value and our own estimate. Good point on the loan information packs too. I'll discuss with The Boss tomorrow as we are just starting to standardise some things and that is on the hit list. Thanks baz657 for the vote of confidence too. Very good points all round in that post. These assets generally depreciate far less than expected because they are mid-life and well looked after in a strong demand sector. Our lessee in this case is effectively a government-owned airline and so there is an element of national prestige involved in keeping them outwardly ship-shape. In terms of their inward ship-shapliness (I'm patenting that word!), the lessee pays us a monthly maintenance deposit which goes towards servicing with the intention of maintaining the condition of the aircraft at a constant condition. Generally, this is over-estimated so that there is always a pool available for expected and unexpected maintenance. We just received back a condition report prior to handover in the office yesterday and the detail that is taken is quite remarkable - I fully expect to see how often the engines have been cycled but didn't expect to see that one of the rubber handgrips needed replacing and 200 other things that wouldn't get checked on a car MOT . We are careful not to oversell just how well we expect them to hold their value but we are always happy to show more information if requested on the state of an individual aircraft. And thanks duck . You probably know more than me
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Post by ablrateandy on Feb 17, 2015 14:19:13 GMT
To make it a slightly more tongue-in-cheek comparison (excuse the flippancy !). Half Life Base Value is NOT the scrap value of the aircraft but it isn't far off... it is defined as : "Base Value is the appraiser’s opinion of the underlying economic value of an aircraft in an open, unrestricted, stable market environment with a reasonable balance of supply and demand, and assumes full consideration of its “highest and best use”. An aircraft’s Base Value is founded on the historical trend of values and in the projection of value trends and presumes an arm’s-length, cash transaction between willing, able and knowledgeable parties, acting prudently, with an absence of duress and with a reasonable period of time available for marketing. " In our case though, the market doesn't have a balance of supply and demand... hence the current market value being 30% higher than the base value. The Half Life Base Value is effectively the value of a pile of bricks and windows. The Half Life Market Value is the value of a house. We are buying a house for £3.45mio but the value of its bricks is £2.68mio. In three years, we expect the bricks to be worth £2.26mio. What will it be worth as a house? Well, worst case scenario you would hope £2.26mio but hopefully someone will want a house building out of them
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Post by ablrateandy on Feb 17, 2015 14:07:52 GMT
That's a perfectly fair question and I will try to answer in a way that is clear . However, if I don't cover it to your satisfaction then feel free to drop me a mail or give me a call! Aircraft are slightly unusual compared with other assets in that there is an established independent authority called Ascend who provide future valuations. They provide two valuations on the date that you query, called the "Half Life Base Value" and the "Half Life Market Value". The HLBV is based on a standard depreciation rate that changes little from year to year. So, on the day of the valuation certificate (which is on the site), we can see both values - the HLBV being the value that their computer model expected the value to be and the HLMV being the value that the aircraft would currently fetch in the open market. However, because the HLMV is the actual value right this second, they do not predict the future market value of the aircraft because they don't want to predict data. Personally (and I have invested in the loan!) I would expect the value of the aircraft in three years to be above the HLBV. At the moment, the HLMV is about 30% higher than the HLBV so I would expect the value of the aircraft to be 15-20% above the HLBV. By showing the HLBV, we are just being absolutely honest with investors and saying "this is the expected worst case". A few things that I would note are : 1. With property, your LTV is based on a constant valuation and doesn't take into account market fluctuations. Our LTVs take into account worst-case fluctuations and still remain over-collateralised. 2. The lessor, Phoenix, would not enter into this transaction if they didn't anticipate having very strong equity in the aircraft at the end of the transaction 3. With loan payments at £49,000 and interest payments at under £23,000, we would not have a difficulty re-financing and re-leasing the aircraft (from a bank if necessary) - there is a lot of wiggle room there if at the end of three years no-one wanted to buy the aircraft from us! 4. Regional turboprops are ace . They are workhorse aircraft and always in demand. We can always find customers for them. 5. Whilst I am making a big statement by saying that I expect the market value to remain well above the base value, there are a few reasons behind this : (a) There is a very limited production line in the sector (I think 70 airframes per year?) (b) Regional air travel is very fast growing and our customers (mainly LatAm and SE Asia) are in very high growth areas so demand is very high (c) Historically, HLMV have out-performed the base values on turboprops. I will find a document to prove that when I am back in the office Hopefully you will see our honesty as it is - we don't want to mislead by giving you our "anticipated future value" of the aircraft - which to be honest we could very legitimately have done! We want to lay out all of the facts of what we, and an independent valuer, see as the worst case scenario and allow you to make an informed choice. Our opinion, and that of Phoenix, is that we are very comfortable on the capital repayment and that we see the HLBV as a worst-case scenario that we have covered.
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Post by ablrateandy on Feb 17, 2015 9:03:13 GMT
Thankyou We have a rather decent pipeline of aircraft and a few other bits and pieces but we like to line up the ducks correctly so that we are happy that they get done! Lots of our stuff has leases attached too which not only secures the cashflows but also lifts the value of the aircraft way above the unencumbered value, something that the Ascend valuation can never take into account. We look forward to the Minibeasts' inheritance being invested!
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Post by ablrateandy on Feb 16, 2015 22:35:31 GMT
Good evening all!
Thanks to those who have signed up for the new loan already. I thought I would give a quick overview of our latest loan. We've got it open for a decent length of time and interest is payable from when you submit your bid (obviously we have a very high degree of confidence on completing!)
Key Points
- the loan is secured against an ATR 42-500 aircraft which has a current value of £3.48mio (c. 71% LTV) - the "worst case" value for the aircraft at the end of 3 years is £2.264mio (note that the current "worst case" value of the aircraft today is £2.68mio but the market value is 800k higher) - the reason for the discrepancy is that the worst case value (Half Life Base Value) is based upon a theoretical equality of supply and demand... but in our market there is a much higher demand than supply so we would expect the value to be around 600k higher - it is best viewed as the difference between a "trade-in" value and a "re-sale price" for a car - despite that, and because we want to protect investors, the lessor will pay an additional £360k (edit - should be 432k (36 x 12,000) over the life of the loan into the SPV, leaving the worst-case value of the SPV at £2.624mio (edit should be 2.696) (we estimate it will actually end up somewhere just over £3mio) - the aircraft has 2 years of a lease remaining and we anticipate no difficulties re-leasing the aircraft at a fairly similar rate to the current one (£49,000 pcm). Demand for turboprops is exceptionally high and supply is very low - the interest cost is less than half of the lease rate on the aircraft so the lessee is very comfortable with the ongoing payments - the current lessee is SATENA, who are effectively owned by the Colombian government and we have never had a payment issue with them - these aircraft are used on infrastructure routes - ie. the government operates them because they need to have aircraft flying between X and Y - in the highly unlikely event of a payment problem, investors have recourse vs the lessor and then the SPV containing the aircraft - the lessee is contributing to a maintenance pool at a level considerably above anticipated maintenance costs, providing additional security in between service periods
Full details are up on the site, and you should rely on those!
Happy to field any questions on valuations, cashflows etc etc if you aren't comfortable on aircraft
Andy
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Post by ablrateandy on Feb 16, 2015 12:53:00 GMT
Good luck
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Post by ablrateandy on Feb 15, 2015 19:26:48 GMT
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Post by ablrateandy on Feb 15, 2015 16:09:16 GMT
Don't get me wrong.... I have no problem with an independent Scotland if that was or is what people want and if they go into it with a full comprehension of the facts. In the same way that I have no problem with people voting any way in a GE. I could point to what I perceive as errors in any manifesto. My desire to see back-pedalling was in relation to the people who presented "the facts" to their voters, rather than the people of Scotland to Westminster. It wasn't intended as an ant-indy or indeed anti-Scot rant . It was an eye roll at politicians generally. And economists.
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Post by ablrateandy on Feb 15, 2015 13:19:17 GMT
A while ago, whilst looking into this properly, I did find a quote where Salmond said something like "We aren't dependent on $120 oil. In fact, we don't care if it sinks as low as $95 because we are adopting a prudent approach."
There would now be some frantic back-pedalling and, I would imagine, a call on Westminster to guarantee the price of oil as it was at independence.
To be honest, I almost wish that they had got a "Yes" vote just to see the frantic reversals that would have been occurring now!
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