|
|
Post by honda2ner on May 12, 2020 11:08:06 GMT
Not so. Looked at the MLA lately? The initial rush of panic discounting has mostly disappeared - MLA lenders are still very much in business. Plus, we are told, AC have institutional investors also wanting to play. And, we are also told, CBILs are deployable for future tranches of existing loans. There is a clear exit route for the AAs and that is to run them down gradually: if that's done carefully and not precipitously then losses should be minimised. Which is where this thread comes in - when the secondary market opens up we'll all be able to take our own positions on what the outcome will be. But is this because of increased platform confidence, or are loan parts getting delisted because people know they caan't sell them? Increased platform confidence is a factor, I'm now splitting my investment into the MLA 50-50 between discounted loans and better looking 9%+ loans. They can both sell (the 9%+ ones have zero available so have a waiting list to BUY (I'm in that waiting list so can confirm it exists)) and the discounted loans will sell at a discount (hopefully less discount than I bought them at). Statements suggesting MLA lenders can't sell are not based on reality, they've always been able to sell and probably always will. I would consider buying sub 9% interest loans on the basis that I would have to hold them till maturity but I would need some eye watering discounts to cover the risks.
|
|
mrsb
Posts: 196
Likes: 102
|
Post by mrsb on May 12, 2020 11:30:53 GMT
You're right of course - but 'rock and a hard place'. Whats the alternative (perhaps CBILS ??) - AC can't bail on the tranches as already discussed. If there's a God, then hopefully AC pushing CBILS funds to further tranches. Of course the eligibility for CBILS is tight, so basket case loans (tranches) will still draw-down from "us" if the borrower chooses.
No doubt (I hope) - new loans (I know - there are none!) are being written with some kind of "pandemic" and "NMC" conditions in them, to allow refusal of further tranches - to be used where there's a clear case of good money after bad. AC really should comment factually on the underlying numbers. Saying things like "£85,000" and "75% of investors" and other vague comments intended to reassure - but transparently disingenuous - is not helpful. Not entirely sure that's the case. Dev loans on AC have a high degree of scrutiny - witness the periodic Survey / Credit reports uploaded to support each tranche. If progress wasn't made and the loan came back as 'a basket case' I'd expect (but don't know for certain) that further funding could be withheld until the situation was rectified. The bigger concern, for me, isn't the funding of future tranches, but the longer term impact of a curtailed economy on demand and pricing. There may be some developments (due to type and location) on the books which may no longer be considered profitable given current forecasts (which may or may not come to pass). The issue for AC / lenders (of all flavours) is that the borrower / developer may simply say, ' sod it - there's no longer any profit in this, I'm walking away'. No demands on filling further tranches, but a part-completed development is a not a good thing. Yes - perhaps. But C19 has made transparent - what was previously rose-tinted. A lot is said (on here and other places) about the nature of valuations, particularly GDV ones - much of it with good cause. They've been based on 'bigger fool' principles; I sense the latter have gone-away for a while! I agree absolutely about part-complete projects. Look at "Evesham" (Relendex). Platform has taken-over as developer to try and ensure best return. Their Directors and affiliates have much skin in it. Not the same with AC, and I await the SM with interest. I'll skip away quite happy at -5%.
|
|
iRobot
Member of DD Central
Posts: 1,680
Likes: 2,477
|
Post by iRobot on May 12, 2020 13:15:48 GMT
The bigger concern, for me, isn't the funding of future tranches, but the longer term impact of a curtailed economy on demand and pricing. There may be some developments (due to type and location) on the books which may no longer be considered profitable given current forecasts (which may or may not come to pass). The issue for AC / lenders (of all flavours) is that the borrower / developer may simply say, ' sod it - there's no longer any profit in this, I'm walking away'. No demands on filling further tranches, but a part-completed development is a not a good thing. The issue is there is no incentive for a borrower that is going down to cut their losses as these will be born by AC lenders.
As an example
If a borrower is in real trouble and there is not much chance of survival and he walks away now he may owe £100,000, after costs AC will get some of that back which would be split say 50/50 between the MLA and AAs. If he carries on he could take another 2 tranches of say £100,000 each, there is a small chance of a turn around and he gets out with a small profit, however the odds are he goes under so this time owing AC £300,000 where over £250,000 is owed to AA holders. He will probably decide to carry on in the hope he gets out OK as it makes no difference to him if he goes down owing £100,000 or £300,000.
Lack of 'skin in the game' - both Borrower and Platform (can thank the FCA for the latter) - is always irksome. I understand - and, in general, agree with - the point you are making; but it should also be noted that in a number of cases (depending where the programme is in the development cycle) those additional two tranches could well have added some value to the site. FWIW - not much  - for those sites that are barely out of the ground (if at all), and regardless of whether I was wearing the Developer, Platform or Lender hat, I'd be seriously considering mothballing the project until it became clearer what the future economic landscape may look like. Still, the Gov't is chucking money at the economy like there's no tomorrow. Perhaps in 6 or 12 months time it'll chuck money at house purchasers to add stimulus there, if / when required. (FTB rebates and zero stamp duty, anyone?)
|
|
ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
Posts: 11,329 
Likes: 11,549
|
Post by ilmoro on May 12, 2020 13:44:45 GMT
The issue is there is no incentive for a borrower that is going down to cut their losses as these will be born by AC lenders.
As an example
If a borrower is in real trouble and there is not much chance of survival and he walks away now he may owe £100,000, after costs AC will get some of that back which would be split say 50/50 between the MLA and AAs. If he carries on he could take another 2 tranches of say £100,000 each, there is a small chance of a turn around and he gets out with a small profit, however the odds are he goes under so this time owing AC £300,000 where over £250,000 is owed to AA holders. He will probably decide to carry on in the hope he gets out OK as it makes no difference to him if he goes down owing £100,000 or £300,000.
Lack of 'skin in the game' - both Borrower and Platform (can thank the FCA for the latter) - is always irksome. I understand - and, in general, agree with - the point you are making; but it should also be noted that in a number of cases (depending where the programme is in the development cycle) those additional two tranches could well have added some value to the site. FWIW - not much - for those sites that are barely out of the ground (if at all), and regardless of whether I was wearing the Developer, Platform or Lender hat, I'd be seriously considering mothballing the project until it became clearer what the future economic landscape may look like. Still, the Gov't is chucking money at the economy like there's no tomorrow. Perhaps in 6 or 12 months time it'll chuck money at house purchasers to add stimulus there, if / when required. (FTB rebates and zero stamp duty, anyone?) Should be noted that in many cases AC borrowers do have skin in the game … developers frequently contribute the site and costs to get development ready, quite a few of them cover any overspends. Platforms having skin in the game … blame MPs as its in the legislation
|
|
- for those sites that are barely out of the ground (if at all), and regardless of whether I was wearing the Developer, Platform or Lender hat, I'd be seriously considering mothballing the project until it became clearer what the future economic landscape may look like.
