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Post by valueinvestor123 on Sept 12, 2019 15:12:44 GMT
Quick question. On this website: www.financialthing.com/lendy-saving-stream/it says that investor gross recovery is likely to be 57/58p before admin costs. Full text: Lendy Administration Quick FactsLendy’s loan book had a book value of £152m split between bridging (£36m) and development (£116m) loans.54 total loans are live of which, 35 are either in or entering administration.25 of the 54 loans are development loans with £116m owed and have a gross value of £265m. 14 of the 25 loans have formal insolvency proceedings against them. It is estimated investor gross recovery will be 57p out of each £ before costs.29 of the 54 loans are bridging loans with an outstanding value of £36m secured against written gross assets of £81m. Current reported values are much lower than £81m. 22 of the 29 loans have formal insolvency proceedings against them. It is estimated investor gross recovery will be 58p out of each £ before costs.At the date of Lendy’s administration appointment, Lendy held eight bank accounts with Barclays. A total of £904,384 was held in seven accounts. Lendy’s eighth account was its client account which totaled £2.6m in held cash.Since the appointment, the company overseeing the administration (RSM) has billed £493,775. The administrator has a fee estimate of £1,025,000.Are these estimates against the gross value of the assets (that they are supposed to be valued at) or just the outstanding debt to investors? And have these projected estimates changed since July? thanks |
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mary
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Post by mary on Sept 12, 2019 15:31:34 GMT
That’s the approx average recovery, before costs. The actual recovery is estimated from as low as 7p/£. Therefore, depending on which loans you are invested in, you may get very little. I’ve not seen if costs will be averaged, or if loans with a high cost of recovery take a larger hit.
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garfield
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Post by garfield on Sept 12, 2019 15:39:52 GMT
Each loan will be treated separately, so no averaging, just as before. The fees should in many/some cases be a lot less than they would have been before administration. Lendy's fee structure has been judged by RSM to be unfair in some cases. Have you joined the Lendy Action Group? Website or Facebook. There's lots of detail on there about all this stuff, including loan specific info.
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Post by valueinvestor123 on Sept 12, 2019 15:48:05 GMT
I meant whether the 57p (lets call it 57%) is meant to be calculated on the book value or on the value as estimated by their (rubbish) valuation agencies;
e.g if Lendy has a loan of £70 with the asset valued at £100, does it mean the estimate is 57% of £70 or £100? (I presume it is the former but just wanted to double-check).
My loans are split across most of the book. I calculated that I would need to receive about 66% or 67p on the balance left, in order to break even (which I won't).
10% loss is ok. But 7p recovery rate...that would be pretty crappy.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Sept 12, 2019 15:56:42 GMT
The 57/58p is the average net return from the lifetime of the loan ie it is expected recovery net of costs & includes interest earned since launch. So anyone who didn't invest from day 1 will get a lower average return. Obviously it assumes equal holdings on all loans so will vary wildly across lenders and isn't really a figure to pin anything on.
. AIUI it is against RSM assessment of book values.
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Post by mrclondon on Sept 12, 2019 16:03:53 GMT
But 7p recovery rate...that would be pretty crappy. If they achieve a minimum of 7% on every loan then they will have avoided the fate of many other p2p platforms that have at least one secured loan totally writen off (i.e. 0% recovery)
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Post by valueinvestor123 on Sept 12, 2019 16:12:43 GMT
Sorry for an aside question....but how can an 'asset backed' loan have a 0% recovery rate? Isn't there something behind one and each of those loans?
Unless all the properties and land have been swept up by a Tsunami...but even then, there would be insurance payouts...
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Post by mrclondon on Sept 12, 2019 16:22:34 GMT
Sorry for an aside question....but how can an 'asset backed' loan have a 0% recovery rate? Isn't there something behind one and each of those loans? Unless all the properties and land have been swept up by a Tsunami...but even then, there would be insurance payouts... Lets take a fictious example
A £700k loan on a plot of land "valued" at £1m (so 70% LTV) on a residual value basis but sat on that land are some derelict buildings with asbestos and the land has japanese knotweed growing on it.
The actual land value may be as little as £150k as cleared land, so the buyer would offer say £50k on the basis that demolition and decontamination of the land will cost him £100k. Then the administrator will deduct the cost of the sale (marketing costs, insurance etc) and their own fees which could easily reach £50k.
Recovery back to lenders - nil.
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Post by valueinvestor123 on Sept 12, 2019 16:38:11 GMT
Lurvely.
Has this happened much? (with property/development loans). Where the realised value ended up 0 or negative after disposal?
I can see this being a freak occurrence on occasion but if it happens frequently, surely there's something very wrong with the whole sector? (mainly the valuation agencies).
They (the sector) need to change incentives; companies shouldn't be allowed to profit on the basis of writing new loans and loan volumes but on the basis of recovery rates/realisation values somehow.
Similar krap happened in the US in 2006-7 (on a much bigger scale); companies were incentivised writing as many and as big loans as possible, using inflated values. There was no room or incentives for quality control or seeing the loans through.
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bramhall17
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Post by bramhall17 on Sept 12, 2019 17:31:22 GMT
7p---100p/£ is the possible range outlined so it is very pessimistic to focus on the bottom. 57/58 is the early projection ( as imoro says based on the lifetime returns incl interest already received per loan but nett of costs) but with strong emphasis on that it depends on the mix of loans that you are involved in .
Personally ignoring any interest I have already received, I am working on the basis of getting circa 30% of my funds outstanding back.
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Post by mrclondon on Sept 12, 2019 17:35:43 GMT
Lurvely. Has this happened much? (with property/development loans). Where the realised value ended up 0 or negative after disposal? I can see this being a freak occurrence on occasion but if it happens frequently, surely there's something very wrong with the whole sector? (mainly the valuation agencies). As yet, my fictious example is a relatively rare occurence. For a real life case study of this genre see the final administrators report of the FS Lytham St Annes Land owner (whilst not spelt out the assumption is its oil/heavy metal contamination that is the issue) where by they abandoned trying to sell the land due to it having an assumed negative value. (Its a complicated loan, but the recovery prospects are bleak).
I was deliberately being provocative in how I phrased my earlier post, but I hope it illustrates that very low percentage recoveries are entirely plausible. MT lenders have (hopefully) dodged a bullet with the Paisley loan by virtue of other assets have been discovered, but the primary asset is "contaminated" by a listed building making the sale of the land for the land value near mpossible ... legal costs to achieve delisting can be extremly high with the need for specialist consultancy reports.
Due to extensive can kicking many distressed p2p loans have not yet reached the end game, and I suspect many of the p2p loans secured on land via residual value valuations will eventually result in very low percentage recoveries.
In truth, the majority of the zero recovery loans seen thus far have fallen into 2 categories, either 2nd/3rd/4th/nth ranking/charge where the earlier charge(s) have only managed a partial recovery, or they have been secured primarily against the balance sheet of a company (and of course if the company fails, the balance sheet will itself have been decimated). Plus a few random cases of fraud by the borrower.
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susan
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Post by susan on Sept 12, 2019 18:18:12 GMT
7p---100p/£ is the possible range outlined so it is very pessimistic to focus on the bottom. 57/58 is the early projection ( as imoro says based on the lifetime returns incl interest already received per loan but nett of costs) but with strong emphasis on that it depends on the mix of loans that you are involved in .
Personally ignoring any interest I have already received, I am working on the basis of getting circa 30% of my funds outstanding back.
I have written all of my Lendy loans off - anything I get back will be a bonus. keeps me sane.
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travolta
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Post by travolta on Sept 12, 2019 18:42:42 GMT
Sorry for an aside question....but how can an 'asset backed' loan have a 0% recovery rate? Isn't there something behind one and each of those loans? Unless all the properties and land have been swept up by a Tsunami...but even then, there would be insurance payouts... Lets take a fictious example
A £700k loan on a plot of land "valued" at £1m (so 70% LTV) on a residual value basis but sat on that land are some derelict buildings with asbestos and the land has japanese knotweed growing on it.
The actual land value may be as little as £150k as cleared land, so the buyer would offer say £50k on the basis that demolition and decontamination of the land will cost him £100k. Then the administrator will deduct the cost of the sale (marketing costs, insurance etc) and their own fees which could easily reach £50k.
Recovery back to lenders - nil.
Japanese Knotweed is easy peasy to clear. I've cleared 1/4 acre with a handspray @ cost of £45.00. OK I know its fictitious, but don't you let people tell you otherwise and rip you off.
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zlb
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Post by zlb on Sept 12, 2019 19:42:46 GMT
Sorry for an aside question....but how can an 'asset backed' loan have a 0% recovery rate? Isn't there something behind one and each of those loans? Unless all the properties and land have been swept up by a Tsunami...but even then, there would be insurance payouts... Lets take a fictious example
A £700k loan on a plot of land "valued" at £1m (so 70% LTV) on a residual value basis but sat on that land are some derelict buildings with asbestos and the land has japanese knotweed growing on it.
The actual land value may be as little as £150k as cleared land, so the buyer would offer say £50k on the basis that demolition and decontamination of the land will cost him £100k. Then the administrator will deduct the cost of the sale (marketing costs, insurance etc) and their own fees which could easily reach £50k.
Recovery back to lenders - nil.
All of that spotted by the valuer, or clearly not. Isn't any of that recoverable through RICS insurance, even if a development loan, can an insurer call it speculative, and therefore claim it's not covered? I've seen talk of DFLs not being easily claimable against, but really? In the case of asbestos and knotweed?
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zlb
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Post by zlb on Sept 12, 2019 19:48:08 GMT
Lets take a fictious example
A £700k loan on a plot of land "valued" at £1m (so 70% LTV) on a residual value basis but sat on that land are some derelict buildings with asbestos and the land has japanese knotweed growing on it.
The actual land value may be as little as £150k as cleared land, so the buyer would offer say £50k on the basis that demolition and decontamination of the land will cost him £100k. Then the administrator will deduct the cost of the sale (marketing costs, insurance etc) and their own fees which could easily reach £50k.
Recovery back to lenders - nil.
Japanese Knotweed is easy peasy to clear. I've cleared 1/4 acre with a handspray @ cost of £45.00. OK I know its fictitious, but don't you let people tell you otherwise and rip you off. unless the knotweed is 1m from your boundary and growing in a SSSI.
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