robski
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Post by robski on Jul 1, 2020 9:39:52 GMT
No one knows the trending other than RS
Its likely they have a stream calculation that shows how the PF will go down and up, taking into account key timings, when most consumer loans pay etc I say down and up as I expected it to go down before going up, but that was based on imperfect info as well. I just assume that once we get the worst part other with (ie the heaviest default periods) then not only will the "good remaining loans" carry on, but the ones that sit within the PF will start generating some cashflow, even if thats 15% of what it should have been, its still positive cashflow to the PF.
In theory it makes no diff if it bounces off zero in September and ends up at 100% in Dec, or if it slowly increases month on month. Other than to soothe the people who want to see massive cash in the PF
People need to stop guessing and saying how it should work, they don't have any decent data to be able to base this off, just like the swathes of other "calculations" made on these boards.
Lets try to stick to real data, the imminent risk for the PF is a liquidity issue, its never been any different. I don't believe RS are idiotic. IF things start to go further south then I suspect a further haircut.
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r00lish67
Member of DD Central
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Post by r00lish67 on Jul 1, 2020 11:01:04 GMT
No one knows the trending other than RS Its likely they have a stream calculation that shows how the PF will go down and up, taking into account key timings, when most consumer loans pay etc I say down and up as I expected it to go down before going up, but that was based on imperfect info as well. I just assume that once we get the worst part other with (ie the heaviest default periods) then not only will the "good remaining loans" carry on, but the ones that sit within the PF will start generating some cashflow, even if thats 15% of what it should have been, its still positive cashflow to the PF. In theory it makes no diff if it bounces off zero in September and ends up at 100% in Dec, or if it slowly increases month on month. Other than to soothe the people who want to see massive cash in the PF People need to stop guessing and saying how it should work, they don't have any decent data to be able to base this off, just like the swathes of other "calculations" made on these boards. Lets try to stick to real data, the imminent risk for the PF is a liquidity issue, its never been any different. I don't believe RS are idiotic. IF things start to go further south then I suspect a further haircut. I don't entirely agree. It's pretty easy to draw some more-useful-than-not trends if you've saved their stats over a year or so. I wrote a few admittedly long-winded posts a few months ago that I'll be devilled if I can find now, but the gist was that their stats continually implied that the PF should be falling far slower than it was. I'm talking as of Sep 2019 - Jan 2020. Their stats said: Expected inflow - Expected outflow = - £x. -£x divided by the average loan term worked out at the PF losing between £125k and £150k a month. However, PF cash in actuality kept on falling by £750k-£1.5m a month consistently. Now, yes you're right, they have better models than us and understand repayments schedules and aren't basically just using fag packets. But ultimately, if you have several months of your PF cash falling by £1m a month when your stats imply an average of £125k, then it's a long long road back to restoring that average. As I stated at the time, I was on the verge of selling out anyway when COVID hit, because their PF had halved and in reality only had a few months of cash left. I just didn't believe that there was going to be a sudden huge swing back. I would personally argue that the liquidity issue was always just the first issue showing up the nonsense number that the ICR always was (something I've been saying for about a year now!). Compared to other P2P, I honestly don't think the RS model/platform is that bad. That has to be true for Metro to even be considering buying their tech/channels etc. However, there still just isn't/wasn't quite room enough to pay investors 4% interest whilst making RS enough profit. Until Spring 2019, they had managed the great feat of keeping the PF suitably pumped and business increasing, but the stats have showed that since then a problem was becoming imminent, even before COVID, hence all their endless faffing with the platform trying to push investor rates as low as they could be. The PF halved, and their loans under management stalled and then began slowly sinking. This virus would have been a big challenge at the best of times, but it certainly was not the best of times for RS when it hit, unfortunately. edit: what was I saying about long-winded posts? oop.
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Post by Ace on Jul 1, 2020 14:00:52 GMT
Don't forget that when RS state there is no change needed to the interest reduction yet they already have all the PF data for June - they just make us wait a month to see it because they can. Perhaps they don't want to scare the horses. A major part of their strategy so far has been to bury their heads in the sand while hoping that a fair wind will blow the stable door shut before the equine occupants panic.
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Post by lingield on Jul 1, 2020 17:08:30 GMT
Don't forget if they 'overfund' the PF they are taking our money and giving it to themselves!
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Post by Ace on Jul 1, 2020 17:17:41 GMT
Don't forget if they 'overfund' the PF they are taking our money and giving it to themselves! Of all the things I need to worry about in the world of P2P I'm pretty sure the possibility of the RS PF being overfunded is a very long way down the list. They haven't managed to hit their PF funding target for a very long time, even after reducing the target for no other reason than they couldn't hit the previous target.
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Post by lingield on Jul 1, 2020 18:48:13 GMT
It is a serious point, if they take impose a 50% capital haircut the PF would be overfunded, but would you be happy?
It is a very small target that they are aiming for, and RS should not be expected to take drastic action potentially leading to an overfunding of the PF at the investors expense. They should do this slowly, great thought and up to date data. So far it appears that they have handled this well, but we will see.
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Post by diversifier on Jul 1, 2020 18:54:31 GMT
In theory it makes no diff if it bounces off zero in September and ends up at 100% in Dec, or if it slowly increases month on month. Other than to soothe the people who want to see massive cash in the PF ...... Lets try to stick to real data, the imminent risk for the PF is a liquidity issue, its never been any different. I don't believe RS are idiotic. IF things start to go further south then I suspect a further haircut. Since you say “ends up at 100% in Dec”, I assume by “it” you mean the Interest Coverage Ratio? If so, then no it actually does make a difference. The ICR hides a cashflow issue within the Provision Fund itself. Much of the PF consists of future income, not Current cash. The crunch would come when current cash equals zero, which happens to correspond to when the ICR = 50%, rather than 0%. And also, no, it’s simply not credible that ICR could go to zero, and recover to 100% within eight months. The excess funding of the PF from the interest rate haircut is about £1.1m per month. RS needed to top up the PF by £10m in 8 months, and that’s how they calculated their plan - halving interest for 8 months. If the PF cash goes down to zero, it then has a bigger mountain to climb in less time remaining. That would require that the default rate be well *below* normal for the final few months of the year, which isn’t going to happen. Those numbers don’t add up. Doesn’t mean it’s doomed, but it does mean that every month it drops by £1m, adds two months to the date when the interest rate could return to normal. Having said all which, I agree it’s important to distinguish between a liquidity problem (which is *the* problem at the moment), and a solvency problem (which we are teetering on the brink of, but not fallen over, and might not be that big a haircut in the end anyway).
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robski
Member of DD Central
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Post by robski on Jul 1, 2020 21:22:40 GMT
Your conflating timing with makeup.
It makes zero difference how it ends up in a position over time, its the point in time that matters and making it there without an issue.
Equally the makeup (cash vs future income) always matters from the perspective there has to be enough cash to meet the rules. Since the current way they pay out they need cash in quite large chunks when defaults happen. They could change this model of course. Move to say 6 months of payments before the PF takes the whole loan. But, as long as there is liquidity to be able to meet the current rules at every point in time, again the ratio doesnt matter. It could be all cash and no future income, again its irrelevant unless there is more need for cash than available cash.
My point was people are saying that they want to see it go to 100%, again timing doesnt matter unless it runs out People saying cash will run out, but they have poor data to base that on, and the more the fund pays out the more assets it has in it. Sure they are degraded assets but non the less there are assets
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
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Post by beagle on Jul 1, 2020 22:52:13 GMT
Your conflating timing with makeup. It makes zero difference how it ends up in a position over time, its the point in time that matters and making it there without an issue. Equally the makeup (cash vs future income) always matters from the perspective there has to be enough cash to meet the rules. Since the current way they pay out they need cash in quite large chunks when defaults happen. They could change this model of course. Move to say 6 months of payments before the PF takes the whole loan. But, as long as there is liquidity to be able to meet the current rules at every point in time, again the ratio doesnt matter. It could be all cash and no future income, again its irrelevant unless there is more need for cash than available cash. My point was people are saying that they want to see it go to 100%, again timing doesnt matter unless it runs out People saying cash will run out, but they have poor data to base that on, and the more the fund pays out the more assets it has in it. Sure they are degraded assets but non the less there are assets Robski is completely correct, we have no real data. RS if they needed to WOULD cut the rates again. Ratios mean nothing if the fund operates. the fund reassures us all. Rs have the data and forecast to their best, therefore, with the current status this is what remains and lets face it no one lost a penny and they managed to release nearly 65 million. pretty impressive. How they do this going forward is hard but they are delivering and Robski is right i wont quote anything but he is bang on.
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Post by diversifier on Jul 1, 2020 23:25:55 GMT
Your conflating timing with makeup. It makes zero difference how it ends up in a position over time, its the point in time that matters and making it there without an issue. Equally the makeup (cash vs future income) always matters from the perspective there has to be enough cash to meet the rules. Since the current way they pay out they need cash in quite large chunks when defaults happen. They could change this model of course. Move to say 6 months of payments before the PF takes the whole loan. But, as long as there is liquidity to be able to meet the current rules at every point in time, again the ratio doesnt matter. It could be all cash and no future income, again its irrelevant unless there is more need for cash than available cash. My point was people are saying that they want to see it go to 100%, again timing doesnt matter unless it runs out People saying cash will run out, but they have poor data to base that on, and the more the fund pays out the more assets it has in it. Sure they are degraded assets but non the less there are assets I’m not quite sure I understand you, but I *think* what you’re saying is this: While the money remains within the platform, it doesn’t really matter which “account” it is in. Therefore, even if the PF “cash” hits zero, it can just give an IOU to the investors account. The shortage doesn’t become real, because investors are constrained in their RYI - and that’s the liquidity issue we already know. I have no objection to that position, but I’m fairly certain that Ratesetter won’t do it. The PF is legally owned by Ratesetter, against which it has some liabilities. You have to look at this from Ratesetter’s viewpoint as a business. As long as the PF is cash-positive, then fine. But if it went negative, Ratesetter would instead be owed money, with a claim on future incoming streams. Now, it has counter party risk against the borrowers defaulting. That’s not the business it is in. The business it is in, is managing flows of other people’s money, not risking its own. It won’t do that. To your second point that timing doesn’t matter - it sounds like you’re accepting that the interest rate cut can last indefinitely, so long as that means capital will be protected. Then yes. But that isn’t Ratesetter’s claim. They claim that it’s time-limited to 8 months. Your final point is interesting. You’re saying that the PF still owns all the defaults, which are accounted as zero, but actually can still be chased and have some value as they are only three months late at that point. I think that’s correct - there is some hidden positive value there, but we have no means of knowing how much.
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Post by Ace on Jul 1, 2020 23:54:54 GMT
RS is a busted flush. It couldn't make a profit before covid and it certainly won't be able to make one during it.
Despite halving the rates to lenders the ICR is still falling. The likelyhood of this reversing as free government money dries up, furloughing stops and unemployment rises rapidly is extremely remote. RS have previous here. They repeatedly assured us that they had taken the necessary actions to restore the ICR to its target of 150%, but it kept falling. They gave up and reduced the target to 125%. The ICR fell below this target and continued to fall each month before covid. All this despite their efforts to massage the figures to make them look better. The ICR has been heading one way for a long time.
If the sale to Metro goes through (at a knock down price) they may be able to make it work. Metro has access to cheaper funds and will be able to reduce platform costs, not least because they won't have to bother with us lenders.
Yes they've managed to return funds to some lucky escapees, but that just leaves more toxic loans for those left to share when the PF cash reaches zero.
I don't understand why some still heap praise on them. For those that say that it would be OK if only we could see the data; there's a reason they don't share it.
I don't think the impending capital losses will be large, but AISI they are coming.
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Post by freefalljunkie on Jul 2, 2020 6:32:28 GMT
RS is a busted flush. It couldn't make a profit before covid and it certainly won't be able to make one during it. Yup, Ratesetter as a business in its current form is finished. It will either wind down in an orderly way as the loan book diminishes, simply go bust, or be taken over, hopefully the latter.
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robski
Member of DD Central
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Post by robski on Jul 2, 2020 11:37:17 GMT
I’m not quite sure I understand you, but I *think* what you’re saying is this: While the money remains within the platform, it doesn’t really matter which “account” it is in. Therefore, even if the PF “cash” hits zero, it can just give an IOU to the investors account. The shortage doesn’t become real, because investors are constrained in their RYI - and that’s the liquidity issue we already know. I have no objection to that position, but I’m fairly certain that Ratesetter won’t do it. The PF is legally owned by Ratesetter, against which it has some liabilities. You have to look at this from Ratesetter’s viewpoint as a business. As long as the PF is cash-positive, then fine. But if it went negative, Ratesetter would instead be owed money, with a claim on future incoming streams. Now, it has counter party risk against the borrowers defaulting. That’s not the business it is in. The business it is in, is managing flows of other people’s money, not risking its own. It won’t do that. To your second point that timing doesn’t matter - it sounds like you’re accepting that the interest rate cut can last indefinitely, so long as that means capital will be protected. Then yes. But that isn’t Ratesetter’s claim. They claim that it’s time-limited to 8 months. Your final point is interesting. You’re saying that the PF still owns all the defaults, which are accounted as zero, but actually can still be chased and have some value as they are only three months late at that point. I think that’s correct - there is some hidden positive value there, but we have no means of knowing how much. Well yes and no In regards cash, which was the original issue many have, I am saying its only an issue if they run out of cash. The exact amount is irrelevant, until (if) it needs more it doesnt have. The non cash part of the PF is not guaranteed (or expected if you understand it) to either be fully realised (its already discounted in theory), or to be convertable to cash within short timescales if needed. The equivalent to a high net worth asset rich individual that has low income and limited cash in the bank. Of course this type of thing is better served by having the assets as cash, its liquidity thats the issue that drives a rapid response should that be needed. RS could easily change the model on how the PF pays. It could very easily abandon the 3 month rule, and make it 12 months, or even full loan term. The issue is the longer it makes payments the more interest its paying as opposed to crystalising the amount it pays out earlier. However, it would likely kick the can significantly down the road to take this approach. It would have to be a bit more sophisticated though, loans that have been affected by eg an IVA would need to be treated differently to loans that will probably reapy, but have a borrower who is sporadic on making payments. It has other options as well, say only paying 75% of outstanding etc What clearly they have been doing previsouly and specifically since COVID is trying to keep a viable business. I always thought the early stages of a PF issue they would step in, I still think they would have (with their own cash I mean), but the COVID one was just too big. Is the business viable. I dont know, I haven't and really cant be bothered to look at their accounts. As an FD you still cant get any really useful info from them, sure indications but they arent really good enough to truly understand. You really need to know what the business as usual operates as, what costs, would that be level or would it decline (or grow), how much cost could be reduced by things such as relocating to a cheaper area (lower direct costs for operatiosn and staff etc). How much "current cost" is really sunk cost that was deferred and being charged back now. IE the sorts of process an administrator would look at to see if the business is viable, or if they should just go to liquidation/winding up. Just as highstreet stores face these sorts of issue so do RS. Interesting though that rates are going up for loans, I see that clearly myself on experian with fewer low cost ones showing for me (no other changes) IF RS can survive there may well be more of a market to go after with more reasonable rates. Although I agree with most, the RS as was will have to change unless they do get taken over and get strong sources of cheap capital and can drop all us guys asap. The model was fine, the market place moved, and the model couldnt adapt, they tried (forcing lower rates, less than fully transparent products etc) but in reality they couldnt adapt enough, COVID has just hastened that issue. I have been drawing down for sometime before the start of this year, just active withdrawl of repayments.
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Post by diversifier on Jul 2, 2020 13:24:24 GMT
I’m not quite sure I understand you, but I *think* what you’re saying is this: While the money remains within the platform, it doesn’t really matter which “account” it is in. Therefore, even if the PF “cash” hits zero, it can just give an IOU to the investors account. The shortage doesn’t become real, because investors are constrained in their RYI - and that’s the liquidity issue we already know. I have no objection to that position, but I’m fairly certain that Ratesetter won’t do it. The PF is legally owned by Ratesetter, against which it has some liabilities. You have to look at this from Ratesetter’s viewpoint as a business. As long as the PF is cash-positive, then fine. But if it went negative, Ratesetter would instead be owed money, with a claim on future incoming streams. Now, it has counter party risk against the borrowers defaulting. That’s not the business it is in. The business it is in, is managing flows of other people’s money, not risking its own. It won’t do that. To your second point that timing doesn’t matter - it sounds like you’re accepting that the interest rate cut can last indefinitely, so long as that means capital will be protected. Then yes. But that isn’t Ratesetter’s claim. They claim that it’s time-limited to 8 months. Your final point is interesting. You’re saying that the PF still owns all the defaults, which are accounted as zero, but actually can still be chased and have some value as they are only three months late at that point. I think that’s correct - there is some hidden positive value there, but we have no means of knowing how much. Well yes and no In regards cash, which was the original issue many have, I am saying its only an issue if they run out of cash. The exact amount is irrelevant, until (if) it needs more it doesnt have. The non cash part of the PF is not guaranteed (or expected if you understand it) to either be fully realised (its already discounted in theory), or to be convertable to cash within short timescales if needed. The equivalent to a high net worth asset rich individual that has low income and limited cash in the bank. Of course this type of thing is better served by having the assets as cash, its liquidity thats the issue that drives a rapid response should that be needed. RS could easily change the model on how the PF pays. It could very easily abandon the 3 month rule, and make it 12 months, or even full loan term. The issue is the longer it makes payments the more interest its paying as opposed to crystalising the amount it pays out earlier. However, it would likely kick the can significantly down the road to take this approach. It would have to be a bit more sophisticated though, loans that have been affected by eg an IVA would need to be treated differently to loans that will probably reapy, but have a borrower who is sporadic on making payments. It has other options as well, say only paying 75% of outstanding etc What clearly they have been doing previsouly and specifically since COVID is trying to keep a viable business. I always thought the early stages of a PF issue they would step in, I still think they would have (with their own cash I mean), but the COVID one was just too big. Is the business viable. I dont know, I haven't and really cant be bothered to look at their accounts. As an FD you still cant get any really useful info from them, sure indications but they arent really good enough to truly understand. You really need to know what the business as usual operates as, what costs, would that be level or would it decline (or grow), how much cost could be reduced by things such as relocating to a cheaper area (lower direct costs for operatiosn and staff etc). How much "current cost" is really sunk cost that was deferred and being charged back now. IE the sorts of process an administrator would look at to see if the business is viable, or if they should just go to liquidation/winding up. Just as highstreet stores face these sorts of issue so do RS. Interesting though that rates are going up for loans, I see that clearly myself on experian with fewer low cost ones showing for me (no other changes) IF RS can survive there may well be more of a market to go after with more reasonable rates. Although I agree with most, the RS as was will have to change unless they do get taken over and get strong sources of cheap capital and can drop all us guys asap. The model was fine, the market place moved, and the model couldnt adapt, they tried (forcing lower rates, less than fully transparent products etc) but in reality they couldnt adapt enough, COVID has just hastened that issue. I have been drawing down for sometime before the start of this year, just active withdrawl of repayments. Ok, I understand you now. I agree that RS could certainly change the way the PF funds defaults, from a 3 month cutoff, to full loan lifetime, which would hugely improve their PF cash position. As you say, the only reason not to do that is the interest payable, but as they reduce the interest that looks increasingly attractive from all perspectives. Perhaps they will read this forum and implement your suggestion!
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Post by Ace on Jul 2, 2020 14:41:48 GMT
Well yes and no In regards cash, which was the original issue many have, I am saying its only an issue if they run out of cash. The exact amount is irrelevant, until (if) it needs more it doesnt have. The non cash part of the PF is not guaranteed (or expected if you understand it) to either be fully realised (its already discounted in theory), or to be convertable to cash within short timescales if needed. The equivalent to a high net worth asset rich individual that has low income and limited cash in the bank. Of course this type of thing is better served by having the assets as cash, its liquidity thats the issue that drives a rapid response should that be needed. RS could easily change the model on how the PF pays. It could very easily abandon the 3 month rule, and make it 12 months, or even full loan term. The issue is the longer it makes payments the more interest its paying as opposed to crystalising the amount it pays out earlier. However, it would likely kick the can significantly down the road to take this approach. It would have to be a bit more sophisticated though, loans that have been affected by eg an IVA would need to be treated differently to loans that will probably reapy, but have a borrower who is sporadic on making payments. It has other options as well, say only paying 75% of outstanding etc What clearly they have been doing previsouly and specifically since COVID is trying to keep a viable business. I always thought the early stages of a PF issue they would step in, I still think they would have (with their own cash I mean), but the COVID one was just too big. Is the business viable. I dont know, I haven't and really cant be bothered to look at their accounts. As an FD you still cant get any really useful info from them, sure indications but they arent really good enough to truly understand. You really need to know what the business as usual operates as, what costs, would that be level or would it decline (or grow), how much cost could be reduced by things such as relocating to a cheaper area (lower direct costs for operatiosn and staff etc). How much "current cost" is really sunk cost that was deferred and being charged back now. IE the sorts of process an administrator would look at to see if the business is viable, or if they should just go to liquidation/winding up. Just as highstreet stores face these sorts of issue so do RS. Interesting though that rates are going up for loans, I see that clearly myself on experian with fewer low cost ones showing for me (no other changes) IF RS can survive there may well be more of a market to go after with more reasonable rates. Although I agree with most, the RS as was will have to change unless they do get taken over and get strong sources of cheap capital and can drop all us guys asap. The model was fine, the market place moved, and the model couldnt adapt, they tried (forcing lower rates, less than fully transparent products etc) but in reality they couldnt adapt enough, COVID has just hastened that issue. I have been drawing down for sometime before the start of this year, just active withdrawl of repayments. Ok, I understand you now. I agree that RS could certainly change the way the PF funds defaults, from a 3 month cutoff, to full loan lifetime, which would hugely improve their PF cash position. As you say, the only reason not to do that is the interest payable, but as they reduce the interest that looks increasingly attractive from all perspectives. Perhaps they will read this forum and implement your suggestion! That suggestion is simply a way of delaying the inevitable by burying ones head deeper in the sand, so might well be attractive to RS. It would have some merit if RS was profitable pre-covid and they were able to hit their PF targets, as it would buy time until normal market conditions returned. Unfortunately, neither of those conditions was true. So, unless the economic conditions are about to become far more favourable, where lenders are prepared to lend for lower interest rates and far fewer borrowers default, which seems extremely unlikely, it just delays the point at which capital reductions need to be declared. It would also lead to larger losses for the unfortunate lenders that failed to escape in time.
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