Post by paul123 on Feb 6, 2020 9:53:47 GMT
Lendy Action Group Frequently Asked Questions.
This represents my best understanding of these words and the situation. It almost certainly contain mistakes and I’ve not always made it clear what are facts and what are my opinions. It doesn’t represent the official position of LAG, the p2pif forum or frank forum.
Acronyms
LAG – Lendy Action Group. A group of lenders acting together to maximise returns for lenders.
M1 – See Model 1
M2 – See Model 2
CC – Creditors Committee. A group representing the interests of creditors to the administrators. Usually done when there are a large number of creditors, too many for the administrators to consult individually.
GT – Grant Thornton. A company employed by RSM to be conflict administrator.
CLB – Conflict Liaison Committee. A group representing the desires of M2 lenders.
Model 1 – A term used to describe earlier lending (and the contracts that govern them) with Lendy where lenders money was taken by Lendy themselves and then lent by them to the borrowers. Since the lenders money is owed by Lendy to the lenders, M1 lenders are creditors of lendy. Model 1 loans are DFL001, DFL002, PBL027, PBL031 & PBL056. All other loans are Model 2.
Model 2 – used to describe all other loans where lenders money was lent directly to the borrowers. Lendy is the “agent” acting for the lenders. The lenders are not creditors of lendy.
RSM - RSM Restructuring Advisory LLP, joint administrators of the companies making up lendy.
Lendy Limited – The main part of Lendy. The company that M1 lenders lent to.
SSSH – Saving Stream Security Holding. The “Agent” in that M2 lenders used to lend to borrowers.
RICS – Royal Institution of Chartered Surveyors. Members of this body are often used by p2p platforms to provide valuations of existing buildings and proposed buildings & Projects.
Non-performing / NPL – a useful general term used to describe a loan where the borrower had broken the terms of the agreement like not repaying on time and refusing to negotiate new terms.
FCA – financial conduct authority. A government department that is tasked with making sure financial companies give consumers a fair deal. They don’t provide support for individual consumers, rather they try to regulate companies and issue general guidance.
Shoosmiths – law firm working for RSM. Were used to provide KYC/AML (Know Your Customer/Anti-Money Laundering) services. Lenders have to pass these tests to be able to withdraw cash from their accounts. Presumably RSM or FCA determined that Lendy’s KYC/AML process was not good enough.
FAQ
Why Did Lendy Enter Administration?
The director of lendy applied to the court for it to happen. Conjecture: This was probably done because they were unable to fund new deals to provide new money for the day to day running of the company and they were no longer receiving enough money from existing loans because they had become non-performing.
What About The Protection Fund?
This is a amount of money that a p2p platform says it has reserved with the aim of making up shortfalls of interest and/or repayments when they are not forthcoming from the borrower. Note that with lendy, interest was usually paid by the borrower up front at the start of the loan or agreed extension. Lendy would then credit “interest” payments to lenders monthly. The protection fund is just a name and number. The platform is under no obligation to protect the money in the protection fund or hold it in a separate account nor is it under any obligation to make up any capital or interest missing from lenders accounts by drawing on the provision fund. If platforms did make such a promise then they would be implying the money is safe like a bank and they would fall foul of FCA rules. Perhaps predictably there is no trace of any of Lendy’s provision fund in anything the administrators have mentioned. Prior to going into administration a company is likely to call upon any and all sources of capital to keep the company afloat and perhaps that happened here.
What about the FCA. Lendy was authorised so wasn’t I protected?
When p2p platforms started to appear in the uk the FCA decided to implement a “light touch” regulation regime in order to encourage the sector to grow and without the strong regulation applying to other sectors. New firms operated under “interim permission” that was easy to pass. Firms were expected to apply for “full permission” in good time. Lendy did apply for full permission. It was granted full permission a few months before RSM were appointed. However neither interim or full permission grant any rights to compensation should things go bad. Opinion: FCA don’t work for the individual consumer rather they try to influence consumers and control industry. They issued a number of new guidelines for the industry to take effect towards the end of 2019 to try to protect consumers.
What about the 70% LTV?
There can be a number of problems with the security offered by borrowers:
1. Commercial property is not like the houses in your street. There isn’t a constant stream of buyers for commercial property. If no-one wants to buy that old factory in the middle of nowhere then that’s the cold reality of the situation. Commercial property, like many things, doesn’t have an intrinsic value. Everything is worth exactly what someone is prepared to pay for it.
2. Some projects are bridging loans. This sometimes means taking a building that is worth a certain amount, taking it down and building something in it’s place or heavily modifying it. If the loan goes bad halfway through this process then in the worst case it might just be a hold in the ground.
3. Decay. If building work is stalled for months then the building can be damaged by weather or vandalism reducing it’s value.
Why is the valuation wrong?
The valuation document is long with multiple caveats. Sometimes it relies upon statements made by the borrower that turn out to be false or misleading. Sometimes the valuation is based on the project having being completed rather than the actually unimproved building or site value. Sometimes the valuation has three values for quick sale, 90 day sale and 180 day sale with the quick sale being as small as a third of the 180 day sale value. If buyers know that the site or building has entered administration they will go very low in their offers. Sometimes, the only willing buyer is the original borrower or some person or entity connected to the buyer in which case a low offer again will be the only offer.
What is the waterfall?
This is a term used to describe how as money is returned to lendy by borrowers or provided by sale of security etc, fees and charges are taken from the money before it is returned to lenders. This is where it starts to get complex. Firstly, in addition to the contract or T&Cs between lenders and lendy there is also a contract between the borrower and lendy that is not visible to lenders. Secondly, there are Model 1 loan T&Cs. Thirdly, Lendy altered their T&Cs a number of times particular towards the end of their normal operation. One or more of the more recent changes appears to favour lendy particularly generously in situations where the loan was in recovery awarding lendy extra “interest” payments from the recovered capital that might otherwise be returned direct to lenders. RSM recognised that these extra fees would be contended and they are keeping the extra aside until a determination can be made. RSM also have stated that this determination would have to be made in court.
Creditors? Lenders? What’s this talk of conflict?
RSM is obliged to obtain the best result for the creditors, the people and companies owed money by Lendy. This obligation is secondary only to RSM getting their fees. In all other cases, their obligation is to creditors only. Who are the creditors? They are primarily model 1 lenders and the director of lendy. The CC legally represents creditors. All members of the CC are lenders. It’s primarily purpose is to ensure that RSM don’t charge excessive fees and to represent the desires of the creditors and even in that it has little power over the process. RSM recognised there was a conflict between M1 and M2 lenders and appointed GT to resolve this conflict. They also set up the CLB (consisting of M2 lenders) to represent the desires of the M2 lenders. LAG decided this conflict was too critical to M2 lenders ultimate recovery of their money to not have independent legal representation acting exclusively in M2 lenders interests thus the LAG legal team and fund was created.
Where can I find out about loan X?
In no particular order
1. on the lendy.co.uk website although the updates are few and far between.
2. In the updates from RSM, also on the lendy.co.uk website.
3. On the p2p independent forum in the Lendy board. Very popular forum, lots of good stuff.
4. On the frank forum in the lendy board. An alternative forum.
5. On the p2p independent forum in the DD central area.
6. In the LAG Facebook group. A bit of a mess - that’s facebook
7. On the LAG website forum area. Very quiet.
How do I join ?
P2p independent forum – Most of the information to open to view but to really get the best out it in terms of following threads and asking and responding to questions just sign up for an account at p2pindependentforum.com
Frank – registration required to read the platform boards. Go to p2pfrank.com
P2pif DD central – join the forum to find out how to access the more detailed information in DD central available to regular users of the forum.
LAG facebook – join facebook then request access to the Lendy Action Group group.
LAG website forums – follow the instructions at lendyactiongroup.co.uk
—
Document History:
06FEB2020 Initial Version.
This represents my best understanding of these words and the situation. It almost certainly contain mistakes and I’ve not always made it clear what are facts and what are my opinions. It doesn’t represent the official position of LAG, the p2pif forum or frank forum.
Acronyms
LAG – Lendy Action Group. A group of lenders acting together to maximise returns for lenders.
M1 – See Model 1
M2 – See Model 2
CC – Creditors Committee. A group representing the interests of creditors to the administrators. Usually done when there are a large number of creditors, too many for the administrators to consult individually.
GT – Grant Thornton. A company employed by RSM to be conflict administrator.
CLB – Conflict Liaison Committee. A group representing the desires of M2 lenders.
Model 1 – A term used to describe earlier lending (and the contracts that govern them) with Lendy where lenders money was taken by Lendy themselves and then lent by them to the borrowers. Since the lenders money is owed by Lendy to the lenders, M1 lenders are creditors of lendy. Model 1 loans are DFL001, DFL002, PBL027, PBL031 & PBL056. All other loans are Model 2.
Model 2 – used to describe all other loans where lenders money was lent directly to the borrowers. Lendy is the “agent” acting for the lenders. The lenders are not creditors of lendy.
RSM - RSM Restructuring Advisory LLP, joint administrators of the companies making up lendy.
Lendy Limited – The main part of Lendy. The company that M1 lenders lent to.
SSSH – Saving Stream Security Holding. The “Agent” in that M2 lenders used to lend to borrowers.
RICS – Royal Institution of Chartered Surveyors. Members of this body are often used by p2p platforms to provide valuations of existing buildings and proposed buildings & Projects.
Non-performing / NPL – a useful general term used to describe a loan where the borrower had broken the terms of the agreement like not repaying on time and refusing to negotiate new terms.
FCA – financial conduct authority. A government department that is tasked with making sure financial companies give consumers a fair deal. They don’t provide support for individual consumers, rather they try to regulate companies and issue general guidance.
Shoosmiths – law firm working for RSM. Were used to provide KYC/AML (Know Your Customer/Anti-Money Laundering) services. Lenders have to pass these tests to be able to withdraw cash from their accounts. Presumably RSM or FCA determined that Lendy’s KYC/AML process was not good enough.
FAQ
Why Did Lendy Enter Administration?
The director of lendy applied to the court for it to happen. Conjecture: This was probably done because they were unable to fund new deals to provide new money for the day to day running of the company and they were no longer receiving enough money from existing loans because they had become non-performing.
What About The Protection Fund?
This is a amount of money that a p2p platform says it has reserved with the aim of making up shortfalls of interest and/or repayments when they are not forthcoming from the borrower. Note that with lendy, interest was usually paid by the borrower up front at the start of the loan or agreed extension. Lendy would then credit “interest” payments to lenders monthly. The protection fund is just a name and number. The platform is under no obligation to protect the money in the protection fund or hold it in a separate account nor is it under any obligation to make up any capital or interest missing from lenders accounts by drawing on the provision fund. If platforms did make such a promise then they would be implying the money is safe like a bank and they would fall foul of FCA rules. Perhaps predictably there is no trace of any of Lendy’s provision fund in anything the administrators have mentioned. Prior to going into administration a company is likely to call upon any and all sources of capital to keep the company afloat and perhaps that happened here.
What about the FCA. Lendy was authorised so wasn’t I protected?
When p2p platforms started to appear in the uk the FCA decided to implement a “light touch” regulation regime in order to encourage the sector to grow and without the strong regulation applying to other sectors. New firms operated under “interim permission” that was easy to pass. Firms were expected to apply for “full permission” in good time. Lendy did apply for full permission. It was granted full permission a few months before RSM were appointed. However neither interim or full permission grant any rights to compensation should things go bad. Opinion: FCA don’t work for the individual consumer rather they try to influence consumers and control industry. They issued a number of new guidelines for the industry to take effect towards the end of 2019 to try to protect consumers.
What about the 70% LTV?
There can be a number of problems with the security offered by borrowers:
1. Commercial property is not like the houses in your street. There isn’t a constant stream of buyers for commercial property. If no-one wants to buy that old factory in the middle of nowhere then that’s the cold reality of the situation. Commercial property, like many things, doesn’t have an intrinsic value. Everything is worth exactly what someone is prepared to pay for it.
2. Some projects are bridging loans. This sometimes means taking a building that is worth a certain amount, taking it down and building something in it’s place or heavily modifying it. If the loan goes bad halfway through this process then in the worst case it might just be a hold in the ground.
3. Decay. If building work is stalled for months then the building can be damaged by weather or vandalism reducing it’s value.
Why is the valuation wrong?
The valuation document is long with multiple caveats. Sometimes it relies upon statements made by the borrower that turn out to be false or misleading. Sometimes the valuation is based on the project having being completed rather than the actually unimproved building or site value. Sometimes the valuation has three values for quick sale, 90 day sale and 180 day sale with the quick sale being as small as a third of the 180 day sale value. If buyers know that the site or building has entered administration they will go very low in their offers. Sometimes, the only willing buyer is the original borrower or some person or entity connected to the buyer in which case a low offer again will be the only offer.
What is the waterfall?
This is a term used to describe how as money is returned to lendy by borrowers or provided by sale of security etc, fees and charges are taken from the money before it is returned to lenders. This is where it starts to get complex. Firstly, in addition to the contract or T&Cs between lenders and lendy there is also a contract between the borrower and lendy that is not visible to lenders. Secondly, there are Model 1 loan T&Cs. Thirdly, Lendy altered their T&Cs a number of times particular towards the end of their normal operation. One or more of the more recent changes appears to favour lendy particularly generously in situations where the loan was in recovery awarding lendy extra “interest” payments from the recovered capital that might otherwise be returned direct to lenders. RSM recognised that these extra fees would be contended and they are keeping the extra aside until a determination can be made. RSM also have stated that this determination would have to be made in court.
Creditors? Lenders? What’s this talk of conflict?
RSM is obliged to obtain the best result for the creditors, the people and companies owed money by Lendy. This obligation is secondary only to RSM getting their fees. In all other cases, their obligation is to creditors only. Who are the creditors? They are primarily model 1 lenders and the director of lendy. The CC legally represents creditors. All members of the CC are lenders. It’s primarily purpose is to ensure that RSM don’t charge excessive fees and to represent the desires of the creditors and even in that it has little power over the process. RSM recognised there was a conflict between M1 and M2 lenders and appointed GT to resolve this conflict. They also set up the CLB (consisting of M2 lenders) to represent the desires of the M2 lenders. LAG decided this conflict was too critical to M2 lenders ultimate recovery of their money to not have independent legal representation acting exclusively in M2 lenders interests thus the LAG legal team and fund was created.
Where can I find out about loan X?
In no particular order
1. on the lendy.co.uk website although the updates are few and far between.
2. In the updates from RSM, also on the lendy.co.uk website.
3. On the p2p independent forum in the Lendy board. Very popular forum, lots of good stuff.
4. On the frank forum in the lendy board. An alternative forum.
5. On the p2p independent forum in the DD central area.
6. In the LAG Facebook group. A bit of a mess - that’s facebook
7. On the LAG website forum area. Very quiet.
How do I join ?
P2p independent forum – Most of the information to open to view but to really get the best out it in terms of following threads and asking and responding to questions just sign up for an account at p2pindependentforum.com
Frank – registration required to read the platform boards. Go to p2pfrank.com
P2pif DD central – join the forum to find out how to access the more detailed information in DD central available to regular users of the forum.
LAG facebook – join facebook then request access to the Lendy Action Group group.
LAG website forums – follow the instructions at lendyactiongroup.co.uk
—
Document History:
06FEB2020 Initial Version.
