alender
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Post by alender on Apr 17, 2020 15:00:08 GMT
What is meant by a facility, is this some sort of term for a bad or bad loans now moved to the PF?
A facility implies to me a commitment which can be taken up when required up to a set value (or at least it did on the systems I worked on), does that imply that the £595,000 is part of a larger sum that a borrower can drawdown or is this the full amount i.e. facility now closed or can more money be assigned to the PF as part of the facility?
If this simply means one or more loans have defaulted would be good to know more detail and if any action can be taken to recover at least some of the money.
More information please GS
Facility just means loan agreement in this context. It could be a flexible facility, but in this case the default amount is clearly £595k because they say this is the 'principal outstanding'. It's fairly irrelevant to us what the maximum available amount under the facility was at this stage. As I've already said above, I'm sure they will be attempting partial recoveries. I hope you are right.
A facility can mean many things but at a guess in this case it is the amount of money a borrower can draw down from GS.
This raises questions, if it was just a bad loan I would have expected GS to have stated there has been a call of £595,000 on the PF
However GS stated
unfortunately, we have assigned a facility with principal outstanding of approximately £595,000 to the Loan Loss Provision Fund.
Therefore can we be sure £595,000 is the full amount or by assigning the facility to the PF there is possible more liabilities on the PF.
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chris1200
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Post by chris1200 on Apr 17, 2020 15:03:49 GMT
Facility just means loan agreement in this context. It could be a flexible facility, but in this case the default amount is clearly £595k because they say this is the 'principal outstanding'. It's fairly irrelevant to us what the maximum available amount under the facility was at this stage. As I've already said above, I'm sure they will be attempting partial recoveries. I hope you are right.
A facility can mean many things but at a guess in this case it is the amount of money a borrower can draw down from GS.
This raises questions, if it was just a bad loan I would have expected GS to have stated there has been a call of £595,000 on the PF
However GS stated
unfortunately, we have assigned a facility with principal outstanding of approximately £595,000 to the Loan Loss Provision Fund.
Therefore can we be sure £595,000 is the full amount or by assigning the facility to the PF there is possible more liabilities on the PF.
I am right. I had to study corporate finance at law school and worked on loan agreements for six months as a trainee solicitor. There is no confusion about what "facility" means in a financing context - it is not "the amount of money they can draw down" it is the loan agreement itself. Once again, yes we can be sure this is the full amount because they say it is the amount of " principal outstanding". This means this is the amount of money that the borrower currently owes.
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alender
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Post by alender on Apr 17, 2020 15:33:15 GMT
I hope you are right.
A facility can mean many things but at a guess in this case it is the amount of money a borrower can draw down from GS.
This raises questions, if it was just a bad loan I would have expected GS to have stated there has been a call of £595,000 on the PF
However GS stated
unfortunately, we have assigned a facility with principal outstanding of approximately £595,000 to the Loan Loss Provision Fund.
Therefore can we be sure £595,000 is the full amount or by assigning the facility to the PF there is possible more liabilities on the PF.
I am right. I had to study corporate finance at law school and worked on loan agreements for six months as a trainee solicitor. There is no confusion about what "facility" means in a financing context - it is not "the amount of money they can draw down" it is the loan agreement itself. Once again, yes we can be sure this is the full amount because they say it is the amount of " principal outstanding". This means this is the amount of money that the borrower currently owes. Thanks for the legal definition, then this will be final amount of default from that borrower with of course the possibility that some/all of this may be recovered which is what I hoped was the case.
The reason I was concerned is because of the wording and my understanding of Facilities from my technical investment banking background.
In this case it is probably Revolving facility, the definition from Thomson Reuters
A committed facility allowing a borrower to draw down and repay amounts (up to a limit) for short periods throughout the life of the facility. Amounts repaid can be re-borrowed, thereby combining some of the flexibility of the overdraft facility with the certainty of a term loan.
I can take it from your much deeper understanding that the borrower cannot legally get more money from this facility during it life unless perhaps the Borrower repays some/all money.
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chris1200
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Post by chris1200 on Apr 17, 2020 15:42:11 GMT
I am right. I had to study corporate finance at law school and worked on loan agreements for six months as a trainee solicitor. There is no confusion about what "facility" means in a financing context - it is not "the amount of money they can draw down" it is the loan agreement itself. Once again, yes we can be sure this is the full amount because they say it is the amount of " principal outstanding". This means this is the amount of money that the borrower currently owes. Thanks for the legal definition, then this will be final amount of default from that borrower with of course the possibility that some/all of this may be recovered which is what I hoped was the case.
The reason I was concerned is because of the wording and my understanding of Facilities from my technical investment banking background.
In this case it is probably Revolving facility, the definition from Thomson Reuters
A committed facility allowing a borrower to draw down and repay amounts (up to a limit) for short periods throughout the life of the facility. Amounts repaid can be re-borrowed, thereby combining some of the flexibility of the overdraft facility with the certainty of a term loan.
I can take it from your much deeper understanding that the borrower cannot legally get more money from this facility during it life unless perhaps the Borrower repays some/all money.
Are... are you trolling me? I can't tell. The definition you just gave doesn't differ from mine - it still describes the overall loan agreement, in this case a particular kind of facility: a revolving facility. What do you think is different in your definition? Whatever the type of facility, what matters is the amount outstanding at the time of default. How do you think the borrower could ever get access to more money after defaulting?
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alender
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Post by alender on Apr 17, 2020 15:55:53 GMT
Thanks for the legal definition, then this will be final amount of default from that borrower with of course the possibility that some/all of this may be recovered which is what I hoped was the case.
The reason I was concerned is because of the wording and my understanding of Facilities from my technical investment banking background.
In this case it is probably Revolving facility, the definition from Thomson Reuters
A committed facility allowing a borrower to draw down and repay amounts (up to a limit) for short periods throughout the life of the facility. Amounts repaid can be re-borrowed, thereby combining some of the flexibility of the overdraft facility with the certainty of a term loan.
I can take it from your much deeper understanding that the borrower cannot legally get more money from this facility during it life unless perhaps the Borrower repays some/all money.
Are... are you trolling me? I can't tell. The definition you just gave doesn't differ from mine - it still describes the overall loan agreement, in this case a particular kind of facility: a revolving facility. What do you think is different in your definition? Whatever the type of facility, what matters is the amount outstanding at the time of default. How do you think the borrower could ever get access to more money after defaulting? Apologies, no I am definitely not questioning you. I am concerned the wording GS have used and I believe you have a better understanding in this area than myself and wanted to be as sure as I could that this is the final amount of liability to the PF of this facility.
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chris1200
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Post by chris1200 on Apr 17, 2020 16:05:05 GMT
Are... are you trolling me? I can't tell. The definition you just gave doesn't differ from mine - it still describes the overall loan agreement, in this case a particular kind of facility: a revolving facility. What do you think is different in your definition? Whatever the type of facility, what matters is the amount outstanding at the time of default. How do you think the borrower could ever get access to more money after defaulting? Apologies, no I am definitely not questioning you. I am concerned the wording GS have used and I believe you have a better understanding in this area than myself and wanted to be as sure as I could that this is the final amount of liability to the PF of this facility. Okay, sorry - to be frank, I'm just surprised at your confusion if you have a background in investment banking and thought you might be taking the p**s.
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Post by drphil on Apr 23, 2020 11:36:09 GMT
Your right they can't make any changes to the T&C during the liquidity event, but I believe they are suggesting even after the event is lifted they can't change their T&Cs for withdrawals. That's why I believe they made that comment about how they want investors to not withdraw when the event is lifted. I've emailed them to check this point. Edit: I originally wrote some analysis of the GS T&C here (compared to RateSetter and others); but it's been a few years since I last practiced law, and I don't want to write anything that's not definitely correct here, so have deleted. May I ask if you've had a reply to your email, Chris?
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chris1200
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Post by chris1200 on Apr 23, 2020 11:39:54 GMT
I've emailed them to check this point. Edit: I originally wrote some analysis of the GS T&C here (compared to RateSetter and others); but it's been a few years since I last practiced law, and I don't want to write anything that's not definitely correct here, so have deleted. May I ask if you've had a reply to your email, Chris? Not a peep, I'm afraid. For reference, the main body of the email was as follows: Further to the below, I just had a question I hoped you could answer. When you say:
"Please note, it is not currently feasible to make wholesale alterations to the operating process of our platform (including changes to withdrawals and/or our terms & conditions with you as a result of any changes), for the duration of the event."
what do you mean by "for the duration of the event"? Are you saying only that you can't make changes to the withdrawal process/broader T&C during the Liquidity Event, or also after it is lifted (if it is lifted)? You mention the issue of a run on withdrawals again causing a Resolution Event. Surely a switch to a form of queued withdrawals based on available liquidity (as employed, for example, by RateSetter and Assetz Capital) is the only way to avoid such an eventuality?
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withnell
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Post by withnell on Apr 23, 2020 12:11:15 GMT
May I ask if you've had a reply to your email, Chris? Not a peep, I'm afraid. For reference, the main body of the email was as follows: Further to the below, I just had a question I hoped you could answer. When you say:
"Please note, it is not currently feasible to make wholesale alterations to the operating process of our platform (including changes to withdrawals and/or our terms & conditions with you as a result of any changes), for the duration of the event."
what do you mean by "for the duration of the event"? Are you saying only that you can't make changes to the withdrawal process/broader T&C during the Liquidity Event, or also after it is lifted (if it is lifted)? You mention the issue of a run on withdrawals again causing a Resolution Event. Surely a switch to a form of queued withdrawals based on available liquidity (as employed, for example, by RateSetter and Assetz Capital) is the only way to avoid such an eventuality?I read that section as pre-empting requests to "be like xyz platform" by saying up front it's not feasible. Both AC and RS had some kind of queuing algorithm in operation for requesting withdrawals of invested funds, so probably was possible to tweak that to meet the current situation, whereas Growth Street would have to build a system from scratch.
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chris1200
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Post by chris1200 on Apr 23, 2020 12:15:52 GMT
Not a peep, I'm afraid. For reference, the main body of the email was as follows: Further to the below, I just had a question I hoped you could answer. When you say:
"Please note, it is not currently feasible to make wholesale alterations to the operating process of our platform (including changes to withdrawals and/or our terms & conditions with you as a result of any changes), for the duration of the event."
what do you mean by "for the duration of the event"? Are you saying only that you can't make changes to the withdrawal process/broader T&C during the Liquidity Event, or also after it is lifted (if it is lifted)? You mention the issue of a run on withdrawals again causing a Resolution Event. Surely a switch to a form of queued withdrawals based on available liquidity (as employed, for example, by RateSetter and Assetz Capital) is the only way to avoid such an eventuality?I read that section as pre-empting requests to "be like xyz platform" by saying up front it's not feasible. Both AC and RS had some kind of queuing algorithm in operation for requesting withdrawals of invested funds, so probably was possible to tweak that to meet the current situation, whereas Growth Street would have to build a system from scratch. Yes - as I've also suggested above. But the point is that I want GS to unambiguously confirm this (if it is correct) and suggest to us how on earth this is going to work without such changes. Saying "please don't withdraw as soon as we re-open the platform" isn't much of a solution. (Edit: I also don't think it's an issue of having the technology there to do this; more your T&C allowing you to do it. In this respect, RS seems to be doing everything above board... AC it's a little sketchier to say the least!)
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Post by garreh on Apr 23, 2020 13:36:07 GMT
Both AC and RS had some kind of queuing algorithm in operation for requesting withdrawals of invested funds, so probably was possible to tweak that to meet the current situation, whereas Growth Street would have to build a system from scratch. This is what's concerning me as well - Growth Street have been pretty poor in their communication and proactivity in this Liquidity Event. From their communication (or lack of) I get the impression they are just waiting, hoping for this to be over and self-resolve. It won't. So they need to do something and prepare, like implement a queued withdrawals system *now* and not in a few months time when the Resolution Event is due to be called. I don't get any sense of "urgency" from them that they are actually doing anything except waiting. Other P2P companies have been proactive and actually put measures in place: * Ratesetter: have queued withdrawals * Assetz Capital: have too implemented queued withdrawals, reduced operating costs by 60%, added borrower fees & investor fees (to help pay interest and keep platform afloat), reached out for funding from BBB, in active developer innovative ways to further solve the liquidity issue, not to mention the regular open line of communication with investors. * Growth street:  honesty I have no idea what they are ACTUALLY doing to help resolve this event.
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chris1200
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Post by chris1200 on Apr 23, 2020 15:03:30 GMT
Both AC and RS had some kind of queuing algorithm in operation for requesting withdrawals of invested funds, so probably was possible to tweak that to meet the current situation, whereas Growth Street would have to build a system from scratch. This is what's concerning me as well - Growth Street have been pretty poor in their communication and proactivity in this Liquidity Event. From their communication (or lack of) I get the impression they are just waiting, hoping for this to be over and self-resolve. It won't. So they need to do something and prepare, like implement a queued withdrawals system *now* and not in a few months time when the Resolution Event is due to be called. I don't get any sense of "urgency" from them that they are actually doing anything except waiting. Other P2P companies have been proactive and actually put measures in place: * Ratesetter: have queued withdrawals * Assetz Capital: have too implemented queued withdrawals, reduced operating costs by 60%, added borrower fees & investor fees (to help pay interest and keep platform afloat), reached out for funding from BBB, in active developer innovative ways to further solve the liquidity issue, not to mention the regular open line of communication with investors. * Growth street: honesty I have no idea what they are ACTUALLY doing to help resolve this event. I think you're conflating two things here. One is to 'resolve' this issue, and the other is how to adapt the platform afterwards to try to make sure it doesn't happen again. I admit they're related - a queued withdrawal system could solve the liquidity issue that resulted in the Liquidity Event - but GS have T&C that structure the response like this. GS sent us an email explaining how they're looking to resolve the Liquidity Event - why do you say they are only 'waiting'? The problem is the second thing - how GS goes forward. There is no need to implement a queued withdrawal system 'now' because during a Liquidity Event ( not a 'Resolution Event' - that's something different) we aren't allowed to make any withdrawals. According to the T&C, withdrawals can't happen and all funds are auto-reinvested out of our control. But after they end the Liquidity Event (if they are able to), this becomes an issue. You're right to mention the differences with RS and AC but, as I've said above, my assumption is that GS are dealing with not having T&C that allow for such measures. RS and AC on the other hand both stress in their T&C that withdrawals depend on adequate liquidity (although AC has gone rather further than that with its equalised distribution). I really don't think building the necessary infrastructure would take GS long at all, this isn't the issue - RS and AC didn't actually have such a queue system in place before all this, their T&C just allowed for one, and it didn't take them long. I don't know if there is a way out of the T&C issue, but certainly this is something I hope they're considering. I would honestly find it amazing if no one at GS had ever wondered what would happen if more money was withdrawn than added to the platform at any one time. But perhaps they really never thought about this and so have now concluded it's not possible to make the necessary changes (their email wasn't clear as it used phrasing like 'currently' and 'for the duration of the event'). One solution is potentially to seek the consent of all lenders to changes in the T&C - but that could be practically very difficult to achieve, as even one lender refusing would block it. I hope they've got other ideas...
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Post by garreh on Apr 23, 2020 15:41:10 GMT
This is what's concerning me as well - Growth Street have been pretty poor in their communication and proactivity in this Liquidity Event. From their communication (or lack of) I get the impression they are just waiting, hoping for this to be over and self-resolve. It won't. So they need to do something and prepare, like implement a queued withdrawals system *now* and not in a few months time when the Resolution Event is due to be called. I don't get any sense of "urgency" from them that they are actually doing anything except waiting. Other P2P companies have been proactive and actually put measures in place: * Ratesetter: have queued withdrawals * Assetz Capital: have too implemented queued withdrawals, reduced operating costs by 60%, added borrower fees & investor fees (to help pay interest and keep platform afloat), reached out for funding from BBB, in active developer innovative ways to further solve the liquidity issue, not to mention the regular open line of communication with investors. * Growth street: honesty I have no idea what they are ACTUALLY doing to help resolve this event. I think you're conflating two things here. One is to 'resolve' this issue, and the other is how to adapt the platform afterwards to try to make sure it doesn't happen again. I admit they're related - a queued withdrawal system could solve the liquidity issue that resulted in the Liquidity Event - but GS have T&C that structure the response like this. GS sent us an email explaining how they're looking to resolve the Liquidity Event - why do you say they are only 'waiting'? The problem is the second thing - how GS goes forward. There is no need to implement a queued withdrawal system 'now' because during a Liquidity Event ( not a 'Resolution Event' - that's something different) we aren't allowed to make any withdrawals. According to the T&C, withdrawals can't happen and all funds are auto-reinvested out of our control. But after they end the Liquidity Event (if they are able to), this becomes an issue. You're right to mention the differences with RS and AC but, as I've said above, my assumption is that GS are dealing with not having T&C that allow for such measures. RS and AC on the other hand both stress in their T&C that withdrawals depend on adequate liquidity (although AC has gone rather further than that with its equalised distribution). I really don't think building the necessary infrastructure would take GS long at all, this isn't the issue - RS and AC didn't actually have such a queue system in place before all this, their T&C just allowed for one, and it didn't take them long. I don't know if there is a way out of the T&C issue, but certainly this is something I hope they're considering. I would honestly find it amazing if no one at GS had ever wondered what would happen if more money was withdrawn than added to the platform at any one time. But perhaps they really never thought about this and so have now concluded it's not possible to make the necessary changes (their email wasn't clear as it used phrasing like 'currently' and 'for the duration of the event'). One solution is potentially to seek the consent of all lenders to changes in the T&C - but that could be practically very difficult to achieve, as even one lender refusing would block it. I hope they've got other ideas... I outlined measures other P2P platforms are taking and cannot find anything worthy of note that Growth Street have actively done as a *direct* result of this event, aside from actually calling the Liquidity Event as required by their terms. The only thing I can point to in their latest communication is that they are winding down lending and "rebalancing" the loan book - but they have been doing that since October even before this whole thing started. What actual *new* measures are they doing to resolve or "adapt" as you say? As for "no need to implement queued withdrawl system now" - I wasn't suggesting they can implement and activate that now. I was suggesting they just get the ball rolling and start work on it, in terms of a feature on their platform. There isn't some magical button they can press to have that functionality coded into their system, so they need to do something *now* because ultimately they simply cannot rely on a plea for investors to not withdraw their money. It's possible they are looking at these things and other areas of exploration behind closed doors, but that goes back to lack of communication and transparency. Until we know otherwise, as an investor, I'm pretty miffed.
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alender
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Post by alender on Apr 24, 2020 8:07:47 GMT
I spoke to GS on a admin issue which they resolved so I guess one bit of good news is that they answered the phone fairly quickly and resolved the issue so it seems they have the money to keep the admin functioning as normal.
I asked about the current situation but of course for obvouios reasons they we unable to give me any real updates but they did say that they were actively looking at options and wanted to know my opinion, I suggested that if interest could be paid to lenders it would ease the situation, they seemed to be open to this idea (be surprised if they have not got this under consideration already) and said this suggestion would be passed on. From my discussions the impression I got was that the issues was the future commitments which prevented even partial withdrawals.
Another positive sign is from the matching page the development rate now 94.2% and Current length of queue now £959,943, these are moving around within an acceptable range and my money is being freed up and rematched with a fair amount in open orders. This could mean there is not much of an issue with defaults but I guess we will not see this in the stats while the PF can cope.
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Post by garreh on Apr 24, 2020 15:43:13 GMT
Well at least they've sent another email, just the usual waffle though. Again, not showing they are actually doing anything except passively waiting for this to be over.
I really do wonder what their overall strategy is. We're approaching the half way mark now into the 3 month Liquidity Event - are they just going to wait until the final week and then check the stats and see if they can open up withdrawals? If not, then Resolution Event? I sincerely hope this is not the case and they are actually exploring ways to sustain the platform in the longer term.
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honesty I have no idea what they are ACTUALLY doing to help resolve this event.