picnicman
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Post by picnicman on Mar 8, 2019 11:51:45 GMT
One of the most detailed responses to lender questions that I've ever seen, much appreciated MoneyThing Yes - from this, whilst the second charge is being allowed by the first charge holder, it has no value if it cannot be enforced so the LTV is around 45% if this was the case. Also, the quarterly monitoring is a bit scary as cash can disappear very quickly and too late for recovery. Therefore best case or worst case! the LTV is over 80% increasing with fees. I appreciate this is worst case and I guess investor sentiment will be tested very soon!. Also refinancing if the business starts to go south may become difficult. All this is leading to my final comment in that if this type of loan is to become common on the platform, i.e paid for by cash from operational performance, I am surprised that MoneyThing is not considering amortisation or at least part amortisation to also provide security for lenders. Hopefully at least places the thought if MoneyThing reads this! - Cheers P
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SteveT
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Post by SteveT on Mar 8, 2019 12:26:02 GMT
A solid if unspectacular start, 20% filled (£130k) after 20 minutes or so. I was happy enough to take part after reading the comprehensive FAQs (what other platform answers every lender question raised?!). It's not without some risk, but then nothing is in the world of P2P lending. The key thing will be to ensure the business continues to trade as projected, so that the property security never needs to be tested...
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cedarcourtcapital
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Listening is not the same as understanding
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Post by cedarcourtcapital on Mar 8, 2019 23:20:09 GMT
Not looking too good... 20% in the first 20 minutes, then another 20% in the next eleven hours!
Do people think this will fly off the shelves after the restricted bid period?
Can this cash strapped business afford to pay cash back? Can it afford not to pay cash back to get the finance it needs?
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Post by mrclondon on Mar 9, 2019 15:58:07 GMT
About another 5% gone in the four hours since the bid restriction was removed (58% remaining at present).
This is the first non-car loan I've invested in at MT for a very long time, and I do so mainly in the knowledge the discounted SM is on its way, and given the low stated LTV I'm very likely to find a willing buyer at a few percent discount if I feel the risk rising. 12% is IMO a reasonable yield for the risks as they stand today.
That said, I am uncomfortable being presented with a VR on a leasehold asset where the valuer doesn't know the lease length, the ground rent payable or the ground rent review mechanism, or if he does refuses to state these on his report. But hey, this is p2p, so I shouldn't really be surprised. Properties with ground rents that double every ten years are now being severely devalued in the market.
Zoopla has a historical for sale listing for the London flat from 2011, in which it is stated the lease had 996 yrs remaining, the ground rent was £200 pa and the service charge £700 pa. The stated lease length seems to be wrong in that advert, as I'm more inclined to believe what MT stated in the Q&A (999 years from December 1992). I also have some concerns about the VR statement of a share of the freehold .... whilst its certainly true there is a shared freehold (as per most apartment blocks) if the flat owned a share of the freehold it would be unusual for the ground rent to be anything other than peppercorn.
I'll purchase all three title documents for the London flat once the loan has drawn down and the MT charges noted to further review this.
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Post by mrclondon on Mar 9, 2019 22:07:14 GMT
MoneyThing , I'm guessing its too late at this point, but I would have liked to have seen two additional loan covenants given the length of the loan term.
a) A requirement to file accounts at CH within n months (say 8 months) of the year end. They appear to file a few days late EVERY year in the first week of October
b) A requirement to not pay dividends if to do so would cause Net Worth (i.e. Shareholder funds less intangible assets) to drop negative. From the group consolidated accounts for y/e Dec 2017 Net Worth is c. £189k but the previous year just c. £10k. The vast majority of the balance sheet strength is accounted for by the intangibles.
If refinance is a probable eventual exit strategy (esp. to a mainstream lender), then encouraging the borrower to file timely accounts with no excessive drawings is in everyone's interest.
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shimself
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Post by shimself on Mar 11, 2019 17:02:25 GMT
I disagree with the LTV calculation It's nowhere near as good as portrayed
They way it's normally done is (1st charge loan + 2nd charge loan)/security in this case then (762+618)/(1725+620) = 58.8% (the security here being both property 1725K and a debenture 620K)
What MT have done in this case is taken the equity after the first property charge as being the property security amount, which is how they arrive at 39% LTV 618/(1725-762+620). The security is much more vulnerable to an overoptimistic valuation than it appears
And I would also strongly note that if this loan were on AC I rather suspect they would not assign any value to the 620K debenture on receivables, and that seeing as this 620K receivables comes from sales of 2M then this company seem to be very slow at getting paid, which seeing as their business is credit ratings seems extremely disappointing
I wrote to Ed about this yesterday but no reply received
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Post by mrclondon on Mar 11, 2019 17:22:49 GMT
I disagree with the LTV calculation It's nowhere near as good as portrayed
They way it's normally done is (1st charge loan + 2nd charge loan)/security in this case then (762+618)/(1725+620) = 58.8% (the security here being both property 1725K and a debenture 620K)
In total agreement, but you've just blown my (future) strategy of off loading on the SM in due course to those who believe stated p2p LTVs
Arguably though using the loan covenant figure of a minimum of £620k debtors could be viewed as being unneccessarily cautious as it will generally run significantly higher than this. On the loan listing MT have provided the 31st Dec 18 (MI not filed) figures, which show debtors at £1.039m ... if we use that figure instead of £620k then the calc is
(762+618)/(1725+1039) = 50%
So a realistic range for LTV is 50-60% IMO.
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SteveT
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Post by SteveT on Mar 11, 2019 17:30:10 GMT
I disagree with the LTV calculation It's nowhere near as good as portrayed
They way it's normally done is (1st charge loan + 2nd charge loan)/security in this case then (762+618)/(1725+620) = 58.8% (the security here being both property 1725K and a debenture 620K)
But the 1st charge loan has no call on the debenture (AIUI) so neither method of calculation truly reflects the risk profile. Bottom line is that %LTV figures in isolation are pretty meaningless unless you understand the assumptions on which they’ve been calculated (see Lendy, Funding Secure et al)
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Post by mrclondon on Mar 11, 2019 17:43:12 GMT
SteveT - I think the difference arises from whether you believe the properties or the debenture is the main security.
If the business (group wide) has failed, then its likely debtors will be minimal (people will have stopped buying the group's services), and hence I regard the property security as being the main security, with the debenture hopefully able to recoup some/all of any shortfall on the sale of the properties.
And the most probable reason for having to call in the loan is the business has stopped servicing the interest on the loan (because they are failing).
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IFISAcava
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Post by IFISAcava on Mar 11, 2019 17:48:34 GMT
I disagree with the LTV calculation It's nowhere near as good as portrayed
They way it's normally done is (1st charge loan + 2nd charge loan)/security in this case then (762+618)/(1725+620) = 58.8% (the security here being both property 1725K and a debenture 620K)
What MT have done in this case is taken the equity after the first property charge as being the property security amount, which is how they arrive at 39% LTV 618/(1725-762+620). The security is much more vulnerable to an overoptimistic valuation than it appears
And I would also strongly note that if this loan were on AC I rather suspect they would not assign any value to the 620K debenture on receivables, and that seeing as this 620K receivables comes from sales of 2M then this company seem to be very slow at getting paid, which seeing as their business is credit ratings seems extremely disappointing
I wrote to Ed about this yesterday but no reply received
Presumably that's why we are getting 12% on MT vs 7% on AC
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Post by mrclondon on Mar 11, 2019 17:56:04 GMT
and that seeing as this 620K receivables comes from sales of 2M then this company seem to be very slow at getting paid, which seeing as their business is credit ratings seems extremely disappointing
Another very good point, but actually its far worse than that, using the y/e figures MT provide, debtors/turnover is
2016 73% 2017 66% 2018 50% (MI)
I assume MT have had sight of the companies aged debtors report, and consider the debtor book as collectable based on "household" names of the end customers.
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shimself
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Post by shimself on Mar 11, 2019 18:17:52 GMT
and that seeing as this 620K receivables comes from sales of 2M then this company seem to be very slow at getting paid, which seeing as their business is credit ratings seems extremely disappointing
Another very good point, but actually its far worse than that, using the y/e figures MT provide, debtors/turnover is
2016 73% 2017 66% 2018 50% (MI)
I assume MT have had sight of the companies aged debtors report, and consider the debtor book as collectable based on "household" names of the end customers.
Indeed, thanks. I think they should look to see if there were significant write-offs in prior years. 1500 debtors from 2088 sales is hard to believe. Prebooked sales as per what Automony (of a nearby parish) used to do of comes to mind
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Post by MoneyThing on Mar 11, 2019 19:01:20 GMT
I disagree with the LTV calculation It's nowhere near as good as portrayed
They way it's normally done is (1st charge loan + 2nd charge loan)/security in this case then (762+618)/(1725+620) = 58.8% (the security here being both property 1725K and a debenture 620K)
What MT have done in this case is taken the equity after the first property charge as being the property security amount, which is how they arrive at 39% LTV 618/(1725-762+620). The security is much more vulnerable to an overoptimistic valuation than it appears
And I would also strongly note that if this loan were on AC I rather suspect they would not assign any value to the 620K debenture on receivables, and that seeing as this 620K receivables comes from sales of 2M then this company seem to be very slow at getting paid, which seeing as their business is credit ratings seems extremely disappointing
I wrote to Ed about this yesterday but no reply received
Evening shimself, Apologies for not acknowledging your email yesterday...I do take the occasional Sunday off . If you copy in support@ that should make sure you get a speedy reply. Additions now added to the FAQs. Kind regards, Ed
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shimself
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Post by shimself on Mar 11, 2019 19:55:06 GMT
I disagree with the LTV calculation It's nowhere near as good as portrayed
They way it's normally done is (1st charge loan + 2nd charge loan)/security in this case then (762+618)/(1725+620) = 58.8% (the security here being both property 1725K and a debenture 620K)
What MT have done in this case is taken the equity after the first property charge as being the property security amount, which is how they arrive at 39% LTV 618/(1725-762+620). The security is much more vulnerable to an overoptimistic valuation than it appears
And I would also strongly note that if this loan were on AC I rather suspect they would not assign any value to the 620K debenture on receivables, and that seeing as this 620K receivables comes from sales of 2M then this company seem to be very slow at getting paid, which seeing as their business is credit ratings seems extremely disappointing
I wrote to Ed about this yesterday but no reply received
Evening shimself, Apologies for not acknowledging your email yesterday...I do take the occasional Sunday off . If you copy in support@ that should make sure you get a speedy reply. Additions now added to the FAQs. Kind regards, Ed Well I waited until the end of the working day, but as the loan is live I thought it was fair to be reasonably speedy. support@ noted
Your reply re LTV was There are different ways of calculating loan to value ratios. We have provided our method
The method you use here is actually absurd: Lets say there was a property valued at 100K, 1st charge 60K (LTV 60%). Then 2nd charge 10K. By the method you use on this loan you would say that the equity was 40K, the 2nd charge being 10K, the LTV on the 2nd charge then being 25%, ie lower than the first charge. It's nonsense. (I hope I'm not making an idiot of myself here)
Noted that the debtors do seem correct to you and that bad debts or write offs are insignificant
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Post by Badly Drawn Stickman on Mar 11, 2019 21:00:20 GMT
Evening shimself, Apologies for not acknowledging your email yesterday...I do take the occasional Sunday off . If you copy in support@ that should make sure you get a speedy reply. Additions now added to the FAQs. Kind regards, Ed Well I waited until the end of the working day, but as the loan is live I thought it was fair to be reasonably speedy. support@ noted
Your reply re LTV was There are different ways of calculating loan to value ratios. We have provided our method
The method you use here is actually absurd: Lets say there was a property valued at 100K, 1st charge 60K. Then 2nd charge 10K. By the method you use on this loan you would say that the equity was 40K, the 2nd charge being 10K, the LTV then being 25%, ie lower than the first charge. It's nonsense. (I hope I'm not making an idiot of myself here)
Noted that the debtors do seem correct to you and that bad debts or write offs are insignificant
The main problem from my viewpoint is that the 'asset' is a bit of a 'car boot sale', so really attaching an accurate LTV is hard and probably pointless. Moneything have clearly with a bit of smoke and mirrors made it look very good, it is an illusion, in reality 'good assets' are probably approaching 90% at best for realisation. I do however think that is enough to made it a viable investment in my case. Given the length of the loan, there should be plenty of opportunity to monitor progress. In truth the first instance of 'non performing' would sound a fairly loud alarm given the interest should be comfortably covered if things are on track. The exit strategy is fairly standard 'hope and pray', but that is inevitably the case. I have seen much worse. This might not read like it, but I think it is worth consideration, despite the obvious weaknesses. Lets be honest most people will see the LTV given and not query it at all. I suspect the only reason it has not already filled is a mass exodus of P2P lenders in general.
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