Liquidity Event (GS)

I enjoyed "Finally, it is worth noting that these updates are steered by questions, queries and suggestions from you, our investors. So, thank you for sharing your feedback and questions as we aim to provide transparency on both the situation and our actions to aim to remedy the Liquidity Event."

Not my question! 

I've also queried as I can't see why, at a time they need money, they're blocking new deposits. Didn't take very much from the last email at all.

Could be in relation to FCA/TCF etc., but it's very clear to everyone that withdrawals are suspended AND if the platform fails there's a high chance of money loss - so if people want to invest (5.3% looks even better now given the interest rate cuts!), why aren't they able to do so? Offering bonuses etc. could be a bit of a grey area, as it seems there's a material uncertainty about whether GS will be trading in 1 year, but they could offer an interest rate boost on new funds, for example. Yes some people are locked in at 5.3%, but those that actively invest now are arguably taking a bigger risk.


And, obviously, raised the queuing system situation. It's in everyone's interests for them to implement it. Even if people are confident of being 'fastest finger first' when (if) withdrawals open again, that's still not in the (overall) interests of the lenders.

Terms don't seem to allow queuing as it stands, but surely term 9.5 (14 days notice of changes) could be invoked, especially given the overall benefit of the change to lenders and borrowers? I'm sure even FOS wouldn't uphold any complaints in that situation - the risk of a 'bank run' (well, the online equivalent!) is so clear and would be a risk to everyone's capital (including the complainant's).

I expect the liquity event will continue for the 90 days. There will be no payouts before then, no changes to terms and conditions, no changes to functionality.

At the end of the 90 days a resolution event will kick in. Unmatched money will be returned and the loan book wind down will commence. This won't be quick and the provision fund may not be sufficient. Pro rata payments will be made, after costs, for potentially a considerable amount of time.

I don't think it is realistic to expect anything else and right now I would plan for this. I don't think anyone should plan for getting any money back quickly.

Clearly if there is more positive news I am sure GS will be in touch, but right now I don't expect GS to say anything any time soon.

Expecting a material number of borrowers to be able to refinance is probably unrealistic right now.

Expecting GS to source sufficient new lenders to get out of the liquidity Event is probably unrealistic right now.

Expecting the PF to be sufficient is perhaps optimistic, although to date GS are at least comfortable about the loan book.

The loan book is small compared to other p2p lenders. There is always the outside possibility that someone will want to buy the company, technology, authorisation etc and do something regarding the liquidity. That may be the best way out for lenders. But absolutely we wouldnt hear anything like this until the deal was done.

There is no point GS giving potentially false hope in an update. They have made it clear that a Liquidity Event has been triggered and the next step if nothing changes is a resolution event.

Gosh, such pessimism!    But I suppose it's warranted, given what we've seen with other platforms.

All I'll say in addition is that GS's founders have quite a bit of skin in the game and that they should be pretty motivated to try to keep this thing going. The content of their very forward-facing communications so far suggests as much - if anything, as others have said, it faces the future a little too much rather than focusing on the problems of the here and now. But obviously we can't read too much into that and all we can really do is wait.

Ultimately any change in T&Cs to do that is helping to protect investments - I'm not sure how anyone could argue otherwise.

Although I wish it were otherwise, I'm afraid your (subjective) interpretation of whether it's an overall good or bad thing isn't really how the law works. I don't want to get into detail because, as I've said above, I'm no longer a practicing lawyer - but this seems likely to me to be an unfair term. The point here - as you'll see if you visit the AC forum - is that such changes to withdrawal terms, could potentially disadvantage larger investors (who may actually have faired better in a Resolution Event) and even the risk of one taking legal action is probably a major concern for GS. Even if no one sues, I don't know how kindly the FCA will take to this sort of thing.

jlend's idea of acquisition/investment may well be the best one. But investor confidence has taken a massive hit, here and across the sector - so even with that, going back to 'normal' isn't going to help.

Yes, quite. I don't see how different owners can really change any of the underlying problems. A cash injection to the lending pool might (regardless of the ownership), but I don't see why anyone would do that right now unless they like p**sing their money away as all it will do is fund our withdrawals!

Where do you get the idea that borrowers would be treated in this way? Clause 6.7 states:

"GSP is free to use funds held in the LLP and/or funds collected from borrowers during a Resolution Event to fund expenses or other payments which it reasonably believes will maximise the probability of borrower repayment, whilst also ensuring borrowers continue to be treated fairly during the collect out process. For example, funds held are likely to be used to fund recovery action against defaulted borrowers and may also be used to fund new drawdown requests if it is determined that a failure to fund the request will materially impact the borrower’s ability to (1) continue trading, (2) repay their facility, or (3) re-finance." (emphasis added)

Essentially, as far as I can tell, things go on somewhat as normal, but with the provision fund ('GSP') becoming beneficial owner of the loans to spread the risk evenly across all investors. It's logical to suggest that GS will be encouraging borrowers to exit loans in some way - which they wouldn't normally - but I can't see anything suggesting this would be forced to happen especially quickly (indeed the T&C suggest the opposite).

Edit: It also looks like some costs that GS would normally pay might also be transferred to the provision fund too (so less money for us). Presumably, there will also be some lenders who will get lucky because their funds won't be invested at the moment the Resolution Event is called, so they'll be able to withdraw. As to how many that is will depend on how much they were to wind down lending beforehand, I suppose.

Edit Edit: I missed a couple of things. In my current loans, at least, GS has a floating charge over assets. In terms of majority votes, I would imagine it's potentially problematic to do anything like this that isn't provided for in the T&C.

The provision fund appears to be a separate limited company, so in theory how GS itself continues or does not and the costs involved shouldn't be our concerns. The costs associated with chasing after the loans, though, it appears will be (indirectly, through the provision fund).

I should note too, you don't have to go into 'administration' to wind up a company. This situation seems quite clean, so GS could just continue as an entity or wind itself up quite quickly and without many costs at all.