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Post by mrclondon on Oct 24, 2019 10:03:38 GMT
I expect a majority of my capital in FS loans to be recovered ...lets say 80% for sake of argument. In general I'm in well secured loans that will recover all capital & most interest, plus a handful of speculative dev projects (such as Cam*** Rd Liverpool) which will probably recover very little.
Exactly how the administration is to be paid for remains an open question, but it would be grossly unfair indeed irresponsible and negligent to sell off loans that will recover 100% at a discount. It wont happen.
Yes, in a few years time selling off whatevers left at a discount to face value would make perfect sense to close the administration.
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r00lish67
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Post by r00lish67 on Oct 24, 2019 10:08:32 GMT
I hear what you're saying and agree it would be best for investors. However, I don't think it's remotely likely because: a) That would considerably reduce the income from this 'project' that the administrators will receive over the next few years. Why would they opt themselves out of a cash cow? b) As you've said, the past loanbook is utterly toxic, and I don't believe any firm will want to take it on as a whole. It's not just the incorrect values - the legal battles and wrangling with very determined and often unscrupulous borrowers would be horrendous. That said, we might well see some loans cherry-picked and refinanced across. As indeed at least one loan was from Collateral to Fundingsecure itself. edit: X-ed with Mrc - yeah, maybe the very very dregs at the end.
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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 Oct 24, 2019 10:13:25 GMT
Ron I get your point. However I fear that if the administrators tried to run down the loan book, the fees may just eat up any returns. Typically they charge £400+ an hour for even pretty junior staff. The administrator fees (I believe) will be paid before any money is returned to investors. Therefore while in your preferred scenario the proceeds from loans may not be socialised, I believe the administrator fees on recovering loans would be. I therefore think it may be in the best interest of all for the loan book to be sold and the returns socialised but I don't know. I also highly doubt that the administrator has the inclination to turn into a pretty substantial debt recovery business, it's a tricky and regulated area that needs specialist knowledge. I think you raised a very fair point, ie. where the remuneration for the administrators will come from. We have a good precedent with Lendy, but I haven't studied it - anyways, it's in the administrators' best interest for the administration to last as long as possible, provided that they're paid, and therefore not to quickly sell the loan book. In any case, we have a GBP 80m loan book, and I think the administrators' fees can be in the context of GBP 1m per year. That's not a huge impact, as in 4 years it would be c. 5% of the total outstanding. For those lenders that would also recover accrued interest from their loans, it would only mean a reduction in the interest received, which would be fair enough. Obviously these are just speculations, but I feel that selling the whole loan book would be unfair and also achieve a very low price, lower that what could be recovered, net of the administration's fees The renumeration of the administrators will come from the assets of FS, that should not include an assets derived from investors cash or loans which are ringfenced (see my quote yesterday from FS FAQ) other than any fees due to FS as agent/trustee.
Lendy is an odd case due to the model 1 loans being assets of the company, not ringfenced, and the revised waterfall that in theory places Lendy as first recipient of recovery proceeds for significant sums. It doesnt really offer a precedent for 'standard' P2P winddowns which FS should be.
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sundown
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Post by sundown on Oct 24, 2019 10:19:05 GMT
Without analysis of the uncompleted loans it's pure guesswork what % of funds will be recovered. I think it best to hold off making such predictions until analysis of the loan book has been done. Is anyone in a position to do this?
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pip
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Post by pip on Oct 24, 2019 10:24:50 GMT
I think you raised a very fair point, ie. where the remuneration for the administrators will come from. We have a good precedent with Lendy, but I haven't studied it - anyways, it's in the administrators' best interest for the administration to last as long as possible, provided that they're paid, and therefore not to quickly sell the loan book. In any case, we have a GBP 80m loan book, and I think the administrators' fees can be in the context of GBP 1m per year. That's not a huge impact, as in 4 years it would be c. 5% of the total outstanding. For those lenders that would also recover accrued interest from their loans, it would only mean a reduction in the interest received, which would be fair enough. Obviously these are just speculations, but I feel that selling the whole loan book would be unfair and also achieve a very low price, lower that what could be recovered, net of the administration's fees The renumeration of the administrators will come from the assets of FS, that should not include an assets derived from investors cash or loans which are ringfenced (see my quote yesterday from FS FAQ) other than any fees due to FS as agent/trustee.
Lendy is an odd case due to the model 1 loans being assets of the company, not ringfenced, and the revised waterfall that in theory places Lendy as first recipient of recovery proceeds for significant sums. It doesnt really offer a precedent for 'standard' P2P winddowns which FS should be. What assets of FS? A few computers and chairs? I highly doubt there will be enough to remunerate the administrators with the hugely complex task of maximising value from the loanbook.
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r00lish67
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Post by r00lish67 on Oct 24, 2019 10:25:41 GMT
I think you raised a very fair point, ie. where the remuneration for the administrators will come from. We have a good precedent with Lendy, but I haven't studied it - anyways, it's in the administrators' best interest for the administration to last as long as possible, provided that they're paid, and therefore not to quickly sell the loan book. In any case, we have a GBP 80m loan book, and I think the administrators' fees can be in the context of GBP 1m per year. That's not a huge impact, as in 4 years it would be c. 5% of the total outstanding. For those lenders that would also recover accrued interest from their loans, it would only mean a reduction in the interest received, which would be fair enough. Obviously these are just speculations, but I feel that selling the whole loan book would be unfair and also achieve a very low price, lower that what could be recovered, net of the administration's fees The renumeration of the administrators will come from the assets of FS, that should not include an assets derived from investors cash or loans which are ringfenced (see my quote yesterday from FS FAQ) other than any fees due to FS as agent/trustee. Lendy is an odd case due to the model 1 loans being assets of the company, not ringfenced, and the revised waterfall that in theory places Lendy as first recipient of recovery proceeds for significant sums. It doesnt really offer a precedent for 'standard' P2P winddowns which FS should be. Do you know what would happen if those FS assets are insufficient? (not a rhetorical question)
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pip
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Post by pip on Oct 24, 2019 10:27:49 GMT
Without analysis of the uncompleted loans it's pure guesswork what % of funds will be recovered. I think it best to hold off making such predictions until analysis of the loan book has been done. Is anyone in a position to do this? Sundown - i agree its pure guesswork what funds will be recovered. But I highly doubt investors will ever be given a clear analysis of the loan book and then be given a choice as to whether a) the entire loan book sold and returns distributed or b) the loan book run down by administrators. Will the FCA mandate how the process works or will this be at the whim of the administrators? I don't know.
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Post by mrclondon on Oct 24, 2019 10:39:51 GMT
Will the FCA mandate how the process works or will this be at the whim of the administrators? I don't know. To achieve full FCA authorisation, p2p platforms have to have in place plans to ensure an orderly winddown of the loanbook in the event of their failure. FS's plan is now being executed, and yes, administration is a necessary part of a winddown plan if the platform has failed.
All winddown plans will be based on running off the loanbook methodically, ensuring the maximum possible recovery to creditors (aka lenders). The FCA would never have accepted a winddown plan that says "flog the loanbook for what we can as quick as we can".
The whole premise of this discussion seems to be about a transfer of capital from those in well secured loans that anticipate a good recovery, to those in the poorly secured (or in some cases unsecured) loans that anticipate a poor recovery. It wont happen. The loan book will be realised and the proceeds distributed based on your specific choice of loans from those offered by FS.
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james21
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Post by james21 on Oct 24, 2019 10:46:37 GMT
I think you raised a very fair point, ie. where the remuneration for the administrators will come from. We have a good precedent with Lendy, but I haven't studied it - anyways, it's in the administrators' best interest for the administration to last as long as possible, provided that they're paid, and therefore not to quickly sell the loan book. In any case, we have a GBP 80m loan book, and I think the administrators' fees can be in the context of GBP 1m per year. That's not a huge impact, as in 4 years it would be c. 5% of the total outstanding. For those lenders that would also recover accrued interest from their loans, it would only mean a reduction in the interest received, which would be fair enough. Obviously these are just speculations, but I feel that selling the whole loan book would be unfair and also achieve a very low price, lower that what could be recovered, net of the administration's fees The renumeration of the administrators will come from the assets of FS, that should not include an assets derived from investors cash or loans which are ringfenced (see my quote yesterday from FS FAQ) other than any fees due to FS as agent/trustee.
Lendy is an odd case due to the model 1 loans being assets of the company, not ringfenced, and the revised waterfall that in theory places Lendy as first recipient of recovery proceeds for significant sums. It doesnt really offer a precedent for 'standard' P2P winddowns which FS should be. What assets do you think they have?, probably no or little cash in the bank, the premises (not sure they owned it) was put up as security for a business loan, a very good IT system possibly, if they owned it that is, what else is there of substance I wonder
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rogedavi
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Post by rogedavi on Oct 24, 2019 10:53:31 GMT
I very much doubt that there will be any buyers for the loan book (AC already ruled it out), unless its carved up into a good and bad bit, or if the price for the whole is something ridiculous like 10c on the dollar so that the buyers can make a healthy return picking the flesh from the carcass.
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Post by mrclondon on Oct 24, 2019 11:09:53 GMT
The expectation in the FS winddown plan will be that the process will be financed primarily by the routine fee income derived from the redemption of loans.
Whilst we may all have doubts as to whether that is going to be sufficeint, I feel there is a major misconception about the prospects for full redemptions of loans. A significant proportion of the loanbook is well secured, and recovery prospects are good. Take Ra****** Rd Warrington as an example. FS has not called in the security, and forced its sale, instead they have allowed the borrower time (far too much IMO) to sell other assets to redeem the loan. In due course, if the loan is not redeemed in the next few months, the administrators will force the sale of that security which will redeem the loan in full, and provide a chunk of fee income. Ditto most of the properties in and around London, its the can kicking that is the problem, not the security itself.
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paulb
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Post by paulb on Oct 24, 2019 11:20:05 GMT
What assets do you think they have? There may not be much at the moment, but as loans are completed (there are some which will pay), the fees/interest which would have gone to FS will now go to pay for the administrators. It may well be that creditors won't see a single penny, but investors (assuming the loans are properly ring-fenced) should see the same returns as if FS were still collecting the payments - perhaps even better if the administrators are better at collecting debts than the original management were. Remember that FS's fees are further down the queue than investors, and I don't believe that should change as a result of the administration. Of course, I guess it's possible that the administrators could appoint themselves (or some chums) as receivers on the loans themselves - these fees are paid before investors and will likely run very high - though there's no real reason to believe they'll be any higher than under FS. (All the above is speculation from someone completely unqualified to make it....)
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Post by ron on Oct 24, 2019 11:43:09 GMT
What assets do you think they have? There may not be much at the moment, but as loans are completed (there are some which will pay), the fees/interest which would have gone to FS will now go to pay for the administrators. It may well be that creditors won't see a single penny, but investors (assuming the loans are properly ring-fenced) should see the same returns as if FS were still collecting the payments - perhaps even better if the administrators are better at collecting debts than the original management were. Remember that FS's fees are further down the queue than investors, and I don't believe that should change as a result of the administration. Of course, I guess it's possible that the administrators could appoint themselves (or some chums) as receivers on the loans themselves - these fees are paid before investors and will likely run very high - though there's no real reason to believe they'll be any higher than under FS. (All the above is speculation from someone completely unqualified to make it....) That's fair enough, even though I wonder how FS's fees can be sufficient to pay for the administrators' fees and salary of the employees that will stay on board during the wind down. After all, the reason they entered administration is that the business is no longer viable... It also needs to be seen what the administrators' approach will be with regards to some of the most complex cases, where there are high costs, and future recovery proceeds are uncertain. I'm thinking about the art loans in particular. Will the administrators write them off? Will they keep fighting in court? In that case, would the lawyers accept being paid on a success fee basis? What seems certain is that FS's creditors will recover nothing, including those Barn******k lenders that invested in a 20% theoretical LTV, where FS forgot to register the charge and "promised" to repay investors with FS's own money.
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pip
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Post by pip on Oct 24, 2019 11:44:39 GMT
Just my opinion but people on this thread are now being very optimistic about the recovery prospects on these loans. One poster said that the issue is not the loans security but recoveries being kicked down the road - I just don't agree with this. What we have actually seen on most loans is that recovery is kicked down the road and then we discover that the underlying security is not what we thought.
I hope we all see a great recovery, but administration or not, almost all of at least my loanbook looked entirely rotten. I have not felt like I would receive a decent recovery for a long time.
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Monetus
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Post by Monetus on Oct 24, 2019 12:09:27 GMT
Lendy is an odd case due to the model 1 loans being assets of the company, not ringfenced, and the revised waterfall that in theory places Lendy as first recipient of recovery proceeds for significant sums. It doesnt really offer a precedent for 'standard' P2P winddowns which FS should be.
Indeed FS is quite a different proposition it would appear. The fact that there was no SLA between Lendy Ltd and SSSH essentially gave the owners (at least in their minds) carte blanche to do as they pleased and vary the contract/terms/fees charged as they saw fit without consideration from investors. This may also be a factor in the ongoing administration to ensure that the fees Lendy Ltd receive from recoveries are fair and reasonable and that any proposed agreement between Lendy Ltd and its ability to draw fees and renumeration from SSSH is valid and legally justifiable.
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