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Post by samford71 on Jun 23, 2019 11:38:33 GMT
I think much of this is completely arbitrary. The company is in administration. None of the previous terms and conditions apply anymore. Think of an example where a company signed contracts promising a 50% of a four bed house in central London for £20,000 and, unsurprisingly, went bust. Would anyone seriously expect the administrators to follow through on the company’s contract and promises? Perhaps some here think the administrators are going to work for free or give us some cash from their own pocket. No they wouldn’t. That would absurd and actually impossible. What are we owed? We are owed the money we transferred to the platform less the money we took off the platform. Doesn’t matter what account the cash was in, what terms and conditions we were given for it, what interest or bonus was promised, or what “loan” it was in, that’s all we are owed and a percentage of that is all we will ever get from the liquidation of this company. I don't understand your logic here. With the exception of some early loans (where it's possible the lenders will be treated as creditors of Lendy), these are bilateral contracts between borrowers and lending syndicates. Legally, RSM cannot simply decide to do a step-in novation on these contracts so that the Lendy(RSM) faces the borrower and Lendy(RSM) faces the lending syndicate.
RSM as administrators of Lendy have a fairly clear duty to the creditors of Lendy. RSM exact obligations to the bilateral lending syndicates is less clear at this point. Lendy designated RSM (Baker-Tilly) as backup providers in situations where the platform ceased to operate, including insolvency. Now, personally, I've always been somewhat skeptical of that contractual arrangement. In an ordered wind-down of Lendy, yes RSM would take over, but in an insolvency there is a clear risk that any obligation is rendered null and void (as the administration would trump the contract for backup services). So I can see three scenarios: first, that RSM wash their hands of the issue, as the servicing contract is null and void, and the lending syndicates will have to recover themselves from the borrowers. Second, that RSM act a back-up providers as expected, probably using recoveries from trust assets to pay for their costs. Note this can result in a conflict of interest for RSM since they will be acting for both creditors of Lendy and the lending syndicates and their interests may not be aligned. Third, that RSM ask the lending syndicates to give-up their bilateral position to the borrowers and instead face Lendy(RSM) i.e. a step-in novation. Such a scenario may lead to the socialization of losses scenario you are considering but this would depend on their exact proposal.
At this point, RSM has yet to propose anything concrete with respect to lending syndicates. It seems from what little I can gather that the second scenario, RSM acting as back-up providers, is still the base case. This could change as their understanding of the overall position changes. Nonetheless, I don't see how RSM can force the lending syndicates to face Lendy(RSM). They can propose this but it may not be accepted, particularly by larger elements of the syndicates.
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thedog
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Post by thedog on Jun 23, 2019 21:10:11 GMT
My point is that can be challenged in the Courts.
Under insolvency law no legal action against the company to become a creditor can be undertaken without permission of the administrators now that the company has become insolvent. If you make a formal request but are refused and want to go above the heads of the the administrators themselves then this requires the permission of the Court before you can even begin such action, and would be quite foolish as the best case result from legal action would place you as an ultimately unpaid creditor of Lendy Ltd's limited assets, it won't help with funds you are already a beneficiary of in the client account. The court would need to see evidence that you can recover both extensive legal fees and judgement from Lendy assets before allowing a case. Additionally I think you would be very rich and very foolish if you instead wanted to sue the administrators for some kind of malpractice in miscategorising you and 22,000 other individuals in the insolvency process. If Lendy had assets available in excess of the £190m in the loan book then most if not all investors would seek that kind of action to try and recover what they had lost through (if you can prove it) mismanagement and negligence, but Lendy doesn't have anything close to that, it appears that LB has made a point of asset stripping the company into various dissociated companies before the FCA placed restrictions preventing any further movements. Essentially, if you want to sue Lendy what and where are the assets you are suing against to give the courts a reasonable expectation of being able to recover judgement and costs from them? If you can't answer that then the court won't give you permission to spend their time going above the administrators professional heads to access assets you want to prove should be spread among you and 22,000 others. £190m loan book, a few million at best in Lendy assets, you would be suing for two or three pence in the pound of whatever meat is left on the bones as an involuntary secured creditor. If instead you want to go to court just to prove a point with no regard for costs, offer the court up front to pay all fees in advance regardless of the outcome or recovery availability and they might allow it, at least you can frame the judgement should you win and hang it in the office safe in the knowledge that you technically won, but lost far more to do so. I'm not talking about suing Lendy or the Administrators or anyone come to that.
If I were a Creditor of Lendy and my recovery looked poor I would to seek to identify classes of Investors / Loans (based on different sets of T&Cs perhaps or some other criteria) who I could argue should respectively be classed as Creditors / Estate Assets if that would enhance my recovery enough to make it worth while. The Administrators / Servicers don't care who are deemed Creditors and who are Investors, that just determines who they give the recoveries to so, so will also want certainty to avoid taking any legal risk themselves.
Will that happen? I don't know depends on the numbers and whether there is a credible case for reclassification which I don't think we're in a position to second-guess.
All I'm saying is that between the commercial intersts of the Creditors and the Administrator's need for absolute legal certainty over the status of Investors before they make distributions there is scope for significant delay. No idea if that will happen but I think people should brace themselvs for delay and then if there isn't one that's great.
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Post by Deleted on Jun 23, 2019 21:30:45 GMT
Under insolvency law no legal action against the company to become a creditor can be undertaken without permission of the administrators now that the company has become insolvent. If you make a formal request but are refused and want to go above the heads of the the administrators themselves then this requires the permission of the Court before you can even begin such action, and would be quite foolish as the best case result from legal action would place you as an ultimately unpaid creditor of Lendy Ltd's limited assets, it won't help with funds you are already a beneficiary of in the client account. The court would need to see evidence that you can recover both extensive legal fees and judgement from Lendy assets before allowing a case. Additionally I think you would be very rich and very foolish if you instead wanted to sue the administrators for some kind of malpractice in miscategorising you and 22,000 other individuals in the insolvency process. If Lendy had assets available in excess of the £190m in the loan book then most if not all investors would seek that kind of action to try and recover what they had lost through (if you can prove it) mismanagement and negligence, but Lendy doesn't have anything close to that, it appears that LB has made a point of asset stripping the company into various dissociated companies before the FCA placed restrictions preventing any further movements. Essentially, if you want to sue Lendy what and where are the assets you are suing against to give the courts a reasonable expectation of being able to recover judgement and costs from them? If you can't answer that then the court won't give you permission to spend their time going above the administrators professional heads to access assets you want to prove should be spread among you and 22,000 others. £190m loan book, a few million at best in Lendy assets, you would be suing for two or three pence in the pound of whatever meat is left on the bones as an involuntary secured creditor. If instead you want to go to court just to prove a point with no regard for costs, offer the court up front to pay all fees in advance regardless of the outcome or recovery availability and they might allow it, at least you can frame the judgement should you win and hang it in the office safe in the knowledge that you technically won, but lost far more to do so. The Administrators / Servicers don't care who are deemed Creditors and who are Investors
The entire point in administration is to identify classes of creditors. Short of legal action you've no choice but to accept it, how and where do you think you will be arguing a case? What legal argument do you want to present? Who are your lawyers? You'll need a court order to stay the winding up of the company in order to dispute the administrators decision. The very bottom line is that if you want to be classed as something else to your advantage, that will obviously disadvantage other parties, and you place in jeopardy everyone's recovery by shifting yourself and other similar creditors to the front of the queue to the disadvantage of others who were already in the queue in front of you. Are you prepared for their legal action to reassert their place in front of you? Lets say you somehow manage to gain the funds to support a legal challenge, you win, and it means that you and 5000 lenders are now classed as creditors in front of the rest of the 22,000 lenders. You've now £2m worth of assets available in Lendy split 5000 ways, so £400 each. How is that going to benefit you or anyone else?
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bigfoot12
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Post by bigfoot12 on Jun 24, 2019 6:55:33 GMT
Legally, RSM cannot simply decide to do a step-in novation on these contracts so that the Lendy(RSM) faces the borrower and Lendy(RSM) faces the lending syndicate. ... Nonetheless, I don't see how RSM can force the lending syndicates to face Lendy(RSM). They can propose this but it may not be accepted, particularly by larger elements of the syndicates. I think that they can do many things with court approval and they are likely to get it if their requests are reasonable. I would expect that once they have assessed the situation regarding client money, repaid loans, outstanding bilateral loans, outstanding lendy loans, and other creditors such as unpaid staff wages and money owed to HMRC, they will, probably in consultation with the FCA come up with a plan that seems "fair". They will present this to the court for approval. Judges in these courts often behave with commercial sanity.
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thedog
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Post by thedog on Jun 24, 2019 12:10:32 GMT
The Administrators / Servicers don't care who are deemed Creditors and who are Investors
The entire point in administration is to identify classes of creditors. Short of legal action you've no choice but to accept it, how and where do you think you will be arguing a case? What legal argument do you want to present? Who are your lawyers? You'll need a court order to stay the winding up of the company in order to dispute the administrators decision. The very bottom line is that if you want to be classed as something else to your advantage, that will obviously disadvantage other parties, and you place in jeopardy everyone's recovery by shifting yourself and other similar creditors to the front of the queue to the disadvantage of others who were already in the queue in front of you. Are you prepared for their legal action to reassert their place in front of you? Lets say you somehow manage to gain the funds to support a legal challenge, you win, and it means that you and 5000 lenders are now classed as creditors in front of the rest of the 22,000 lenders. You've now £2m worth of assets available in Lendy split 5000 ways, so £400 each. How is that going to benefit you or anyone else? Hi, to repeat, I'm not suggesting it's what we or other lenders should do. I don't know how Lendy funded itself (I haven't researched the detail), but most companies have significant debt funding.
So I'm suggesting that whoever provided debt funding to Lendy and is therefore a Creditor MIGHT seek to improve their position in this way. Yes, that would be by legal action to challenge the classification of (some) lenders as "Investors" with the aim of having their investments and the assets they funded brought into the Lendy estate if that improved the recoveries of the (original) Creditors. Hypothetical Example. Imagine £10m Creditor with expected recovery of 50% (£5m). The Creditor identifies a class of loans totalling £15m with expected recovery of 90% (£13.5m) which having examined the contracts and records they believe they can argue should be Creditors pari passu to them. If they can succeed in having those loans treated as Creditors then there will be £25m Creditors with recovery of £18.5m, making the recovery due to the £10m Creditor £7.4m. Those original Creditors would have improved their position (at the expense of those Investors) by £2.4m.
You seem very confident you know how this will play out. Maybe you're right. What I'm saying is "Expect the Unexpected", this is just an example of a possible Unexpected, and don't be surprised if questions remain when the Administrators present their report.
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Post by brightspark on Jun 24, 2019 12:53:33 GMT
You are correct to make the point. Investors in HQ want their part payment now. The deafening silence concerning the part repayment of this very large sum of money is indicative of the sort of shenanigans that may be about to happen. We will just have to wait and see but I am not holding my breath.
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ilmoro
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Post by ilmoro on Jun 24, 2019 13:00:48 GMT
Administrator decisions can be challenged in the courts on the grounds that they might do 'unfair harm' to the interests of a party/parties but the courts have demonstrated themselves reluctant to interfere.
thedog TMK Lendy was not funded using external finance so I do not believe there will be any major external creditors like banks etc. Liam did have a charge over Lendy, possibly to finance the groups buyout of Tim, but that is marked satisfied. The only known external finance was an overdraft from a high street challenger bank secured against the LPR bank account (ie the provision fund balance)
Im afraid its all speculation until the adminsitrators produce their initial report & even that may not be conclusive if they are still consulting on investor/creditor status.
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thedog
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Post by thedog on Jun 24, 2019 13:50:34 GMT
OK, in that case my specific example is unlikely given the "fact-pattern" (as lawyers would call it). How on earth was it funded then? Equity and retained profit?? Wow, that's unusual.....
This was just an example and my main point, and I think you're on the same page as me on this, is that this remains unpredictable. And until the Creditor / Investor question is fully resolved, with no threat of challenge, Administrators will be reluctant to release funds so delays look possible to me. All speculation as you say so we will see...
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Post by Deleted on Jun 24, 2019 14:32:22 GMT
The entire point in administration is to identify classes of creditors. Short of legal action you've no choice but to accept it, how and where do you think you will be arguing a case? What legal argument do you want to present? Who are your lawyers? You'll need a court order to stay the winding up of the company in order to dispute the administrators decision. The very bottom line is that if you want to be classed as something else to your advantage, that will obviously disadvantage other parties, and you place in jeopardy everyone's recovery by shifting yourself and other similar creditors to the front of the queue to the disadvantage of others who were already in the queue in front of you. Are you prepared for their legal action to reassert their place in front of you? Lets say you somehow manage to gain the funds to support a legal challenge, you win, and it means that you and 5000 lenders are now classed as creditors in front of the rest of the 22,000 lenders. You've now £2m worth of assets available in Lendy split 5000 ways, so £400 each. How is that going to benefit you or anyone else? Hi, to repeat, I'm not suggesting it's what we or other lenders should do. I don't know how Lendy funded itself (I haven't researched the detail),Lendy take upfront arrangement fees and additional servicing fees in the event of extensions or recovery, but most companies have significant debt funding source?.
So I'm suggesting that whoever provided debt funding to Lendy Who has provided debt funding? If a company can no longer pay the bills it is insolvent, and legally has to stop trading and is therefore a Creditor MIGHT seek to improve their position in this way. Creditors are either secured or unsecured Yes, that would be by legal action to challenge the classification of (some) lenders as "Investors" with the aim of having their investments and the assets they funded brought into the Lendy estate if that improved the recoveries of the (original) Creditors. Lendy doesn't have an estate, it has company assets, of which are single digit percentages of the loan book at best.
Hypothetical Example. Imagine £10m Creditor with expected recovery of 50% (£5m). The Creditor identifies a class of loans totalling £15m with expected recovery of 90% (£13.5m) which having examined the contracts and records they believe they can argue should be Creditors pari passu to them. If they can succeed in having those loans treated as Creditors then there will be £25m Creditors with recovery of £18.5m, making the recovery due to the £10m Creditor £7.4m. Those original Creditors would have improved their position (at the expense of those Investors) by £2.4m. Lendy don't have anywhere near that level of assets. You must not confuse Lendy acting as agent (Lendy Ltd) with loan charges and assets in held in SSSH on trust. They have gone into administration because they have nothing left with which to pay their creditors. At best there will be the auction of the property lendy worked from, which just so happens to be joined on to the property the Director lives in. Perhaps £500,000 available to be liquidated?
At best the cost of legal action would be into the hundreds of thousands which Lendy would be expected to pay from whatever is left after secured and unsecured creditors have liquidated the property. You can't make yourself a secured creditor because you don't have any legal charge over any of their assets.
You seem very confident you know how this will play out. Maybe you're right. What I'm saying is "Expect the Unexpected", this is just an example of a possible Unexpected, and don't be surprised if questions remain when the Administrators present their report. There's nothing to be unexpected if you properly understand the administration process of a regulated financial company. The process followed is black and white. The only exception to that would be potential criminal action which had been intentionally hidden, but so far as the financial side goes there's not really much room to leave things open to interpretation, insolvency law has to be applied.
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Post by Deleted on Jun 24, 2019 14:35:30 GMT
You are correct to make the point. Investors in HQ want their part payment now. The deafening silence concerning the part repayment of this very large sum of money is indicative of the sort of shenanigans that may be about to happen. We will just have to wait and see but I am not holding my breath. It is the FCA, not the administrators who are preventing access to those funds. The admins have 8 weeks to balance the books and report to the FCA so they can begin to approve payments. Anything before those 8 weeks should be considered a bonus, and the administrators are under no obligation to report on anything until the conclusion of their investigation, otherwise they may give out incorrect information causing more harm than good.
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Post by Deleted on Jun 24, 2019 14:41:13 GMT
OK, in that case my specific example is unlikely given the "fact-pattern" (as lawyers would call it). How on earth was it funded then? Equity and retained profit?? Wow, that's unusual.....
This was just an example and my main point, and I think you're on the same page as me on this, is that this remains unpredictable. And until the Creditor / Investor question is fully resolved, with no threat of challenge, Administrators will be reluctant to release funds so delays look possible to me. All speculation as you say so we will see...
Lendy funded it's operations through fees paid by the borrower to arrange the loan, and the equivalent of 1% of the interest per month on loans where lenders get the other 12%. On larger loans like HQ that equates to hundreds of thousands of pounds. Then when there are defaults Lendy take the legal fees and recovery fees out of the funds they recover, before handing what is left back to the lenders. It was in Lendy's interests for loans to go into default in order to attract more fees, more interest, etc. Massive conflict of interests. Many believe this to be unfair as Lendy moved themselves to the front of the recovery costs queue without notifying investors, they just tweaked their terms and quietly brushed it under the carpet.
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garfield
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Post by garfield on Jun 24, 2019 15:26:32 GMT
...At best there will be the auction of the property lendy worked from, which just so happens to be joined on to the property the Director lives in. Perhaps £500,000 available to be liquidated?...
This property was recently transferred into LB's wife's name, i.e. before L went into admin. See companies house for details. I can't recall the reference ATM (sorry!)
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Post by Deleted on Jun 24, 2019 16:46:18 GMT
This property was recently transferred into LB's wife's name, i.e. before L went into admin. See companies house for details. I can't recall the reference ATM (sorry!)
Administrators and liquidators can claw back property and assets that were improperly given away up to 10 years prior for several reasons, one of which is on the basis that the transfer was made to deprive creditors in the event of administration/liquidation and/or the transfer was made to someone connected with the business, a creditor, and in this case the boss's Mrs. Admins won't be having any of that nonsense.
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sydb
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Post by sydb on Jun 24, 2019 16:47:13 GMT
OK, in that case my specific example is unlikely given the "fact-pattern" (as lawyers would call it). How on earth was it funded then? Equity and retained profit?? Wow, that's unusual.....
This was just an example and my main point, and I think you're on the same page as me on this, is that this remains unpredictable. And until the Creditor / Investor question is fully resolved, with no threat of challenge, Administrators will be reluctant to release funds so delays look possible to me. All speculation as you say so we will see...
Lendy funded it's operations through fees paid by the borrower to arrange the loan, and the equivalent of 1% of the interest per month on loans where lenders get the other 12%. On larger loans like HQ that equates to hundreds of thousands of pounds. Then when there are defaults Lendy take the legal fees and recovery fees out of the funds they recover, before handing what is left back to the lenders. It was in Lendy's interests for loans to go into default in order to attract more fees, more interest, etc. Massive conflict of interests. Many believe this to be unfair as Lendy moved themselves to the front of the recovery costs queue without notifying investors, they just tweaked their terms and quietly brushed it under the carpet. I am not arguing at all but I am amused at your clarity describing Lendy's operations. On two loans a number of us know about, my understanding is that Lendy's interest was about 2% on one and 3% on another, while lenders' 'received' interest rate was to be 11%. If memory serves, the two separate loan agreements with the borrower were presented as one loan to the lenders. On top were arrangement fees. Furthermore, overdue interest on late payments was an additional 3%/month, to be distributed between Lendy and lenders in a manner I can't remember (possibly undeclared). And yes, then there would also be legal fees and recovery fees if defaulted.
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thedog
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Post by thedog on Jun 24, 2019 16:54:15 GMT
Hi, to repeat, I'm not suggesting it's what we or other lenders should do. I don't know how Lendy funded itself (I haven't researched the detail),Lendy take upfront arrangement fees and additional servicing fees in the event of extensions or recovery, but most companies have significant debt funding source?.
So I'm suggesting that whoever provided debt funding to Lendy Who has provided debt funding? If a company can no longer pay the bills it is insolvent, and legally has to stop trading and is therefore a Creditor MIGHT seek to improve their position in this way. Creditors are either secured or unsecured Yes, that would be by legal action to challenge the classification of (some) lenders as "Investors" with the aim of having their investments and the assets they funded brought into the Lendy estate if that improved the recoveries of the (original) Creditors. Lendy doesn't have an estate, it has company assets, of which are single digit percentages of the loan book at best.
Hypothetical Example. Imagine £10m Creditor with expected recovery of 50% (£5m). The Creditor identifies a class of loans totalling £15m with expected recovery of 90% (£13.5m) which having examined the contracts and records they believe they can argue should be Creditors pari passu to them. If they can succeed in having those loans treated as Creditors then there will be £25m Creditors with recovery of £18.5m, making the recovery due to the £10m Creditor £7.4m. Those original Creditors would have improved their position (at the expense of those Investors) by £2.4m. Lendy don't have anywhere near that level of assets. You must not confuse Lendy acting as agent (Lendy Ltd) with loan charges and assets in held in SSSH on trust. They have gone into administration because they have nothing left with which to pay their creditors. At best there will be the auction of the property lendy worked from, which just so happens to be joined on to the property the Director lives in. Perhaps £500,000 available to be liquidated?
At best the cost of legal action would be into the hundreds of thousands which Lendy would be expected to pay from whatever is left after secured and unsecured creditors have liquidated the property. You can't make yourself a secured creditor because you don't have any legal charge over any of their assets.
You seem very confident you know how this will play out. Maybe you're right. What I'm saying is "Expect the Unexpected", this is just an example of a possible Unexpected, and don't be surprised if questions remain when the Administrators present their report. There's nothing to be unexpected if you properly understand the administration process of a regulated financial company. The process followed is black and white. The only exception to that would be potential criminal action which had been intentionally hidden, but so far as the financial side goes there's not really much room to leave things open to interpretation, insolvency law has to be applied.
Ok, I really try to avoid getting into arguements online so I'm not going to debate this point by point (funding is different to fee income, "estate" is the term for the assets of a "dead" company - what you've called "company assets" - it's the same as the "estate" of a deceased person, and I could go on).
You think the law is black and white, I think it is rarely black and white and this may take time and throw up some surprises, nothing we say here will answer that difference of opinion so let's leave it at that.
I hope you (and the rest of us!) get back your investments.
All the best, woofs and licks to the gang at Planet Express.....
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