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Post by southseacompany on May 22, 2020 6:14:30 GMT
Recently I've seen a number of people discuss the bonds issued by P2P companies, especially the two Mintos LOs of Mogo and IuteCredit. I've done the numbers on IuteCredit. I'm cautious in light of things like the upcoming bond maturities ( 2 million in three weeks' time and 4 million in September) in the face of deteriorating customer payment discipline and demand. Granted, the yield on the bond is indeed better than in similar IuteCredit loans on Mintos, but I wouldn't buy those anyway (a term of over 3 years is too long for my liking). It's interesting to note the bond covenants, which require IuteCredit to maintain an interest coverage ratio of 1.5. In the first quarter, it was 2.8, so they're well clear. Well, actually, they lost quite a bit of money on currency movements. If that were included, the ratio would have been 2.0, and that was in a quarter where the first half was basically unaffected by the pandemic. IFRS allows forex effects to be excluded from EBITDA, so their 2.8 ratio is not wrong, but is it not misleading? Mogo's bond traded very low, but has since come back quite a bit. They are similarly nonchalant about currency risk. From their reporting, it's hard to assess what their ancient cars are really worth. After looking at them, I haven't bought any of these bonds so far. Anyone else? Did you look at the bonds? Did you invest? Why or why not? |
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fric
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Post by fric on May 22, 2020 9:07:52 GMT
In troubled times investing in a high risk business is a suicide imho. Its way too risky compared to the interest you get. Remember that these LOs doesn't have any assets or anything, they only have debitors who by the way are also very high risk clients. So if enough people start to default, than its game over for the LO. You know what is worst part about a non-bank lender in a case of solvency issues? Their clients are very high risk, therefore if they would want to (or be forced to) to sell they credit portfolio they would be getting pennies on the dollar for it - these aren't mortgages issued by the banks... Especially bad debt portfolio, it would probably be sold at like 1/10 of face value with the thought in mind that most of if would be written off anyway.
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Post by jmn on May 22, 2020 15:47:47 GMT
I invested. The only trades on each one (Iute 23 and Mogo 22) in 3 days are mine. What a dry market! There are market makers staying at bid+1% but no real investors, to my big surprise. At least it's funny to set the spot of a 100M bond.  At ~21% xirr before tax, i take the risk. I used to invest at higher risk for lower return. In case of bankrupcy, so I go in Romania to get back my share on those lovely Seat Ibiza from 2002  The nominal yield is not that much (9.5% mogo, 13% iute) so the call option is unlikely to be triggered, and if it is, my yield will be still higher. I've no access to the LV bonds, so I bought only the Frankfurt Börse ones. |
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cwah
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Post by cwah on May 25, 2020 22:09:51 GMT
I invested. The only trades on each one (Iute 23 and Mogo 22) in 3 days are mine. What a dry market! There are market makers staying at bid+1% but no real investors, to my big surprise. At least it's funny to set the spot of a 100M bond. At ~21% xirr before tax, i take the risk. I used to invest at higher risk for lower return. In case of bankrupcy, so I go in Romania to get back my share on those lovely Seat Ibiza from 2002 The nominal yield is not that much (9.5% mogo, 13% iute) so the call option is unlikely to be triggered, and if it is, my yield will be still higher. I've no access to the LV bonds, so I bought only the Frankfurt Börse ones. What makes you want to take the risk to get 20% return with risk to loose all your capital? The used car market feels very dangerous imho
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Post by southseacompany on May 26, 2020 2:33:21 GMT
The risk profile of these bonds is substantially the same as similar loans on Mintos, so the same argument applies there. One can ask: if you wouldn't buy debt of some of the highest-rated LOs at a ~20% yield, would you buy anything on Mintos? Why?
Mogo doesn't pass my smell test because of the leverage. Used car prices could be impacted by liquidating fleets. For example Hertz, which went bankrupt last week, could well end up in liquidation.
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Post by jmn on May 26, 2020 6:41:01 GMT
I think the risk is even lower because * they are senior Bonds, only a hard Bankrupt would make them default. * they come from the mother compagny directly, no need for group guarantee * they follow Stock Exchange rules, not Mintos rules, forget pending payment, suspension etc. * The yield is higher than almost everything on Mintos, and the LO is the highest rated. On the downside: * Broker fees both at buy and sell, buy is free on mintos * depending on your country, more complex taxation (coupons and discount typically have different tax rules). * buy ans sell by multiple of 1000€ (before discount) * expiry is long (2-3 Years) * coupon every 3-6 months, capital at end, no amortization What makes you want to take the risk to get 20% return with risk to loose all your capital? 1. If i'm present in a P2P forum, so i'm ready to invest into P2P 2. 20% yield on a real bond, from a solid LO (at least among the less weak) for a long period, with backed assets (cars), if i don't invest, what could i invest in? That's the point raised by southseacompany. If i weren't ready to lose capital, i would put money in a bank account and get my 0.2% p.a. |
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cwah
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Post by cwah on May 26, 2020 20:30:05 GMT
I think the risk is even lower because * they are senior Bonds, only a hard Bankrupt would make them default. * they come from the mother compagny directly, no need for group guarantee * they follow Stock Exchange rules, not Mintos rules, forget pending payment, suspension etc. * The yield is higher than almost everything on Mintos, and the LO is the highest rated. On the downside: * Broker fees both at buy and sell, buy is free on mintos * depending on your country, more complex taxation (coupons and discount typically have different tax rules). * buy ans sell by multiple of 1000€ (before discount) * expiry is long (2-3 Years) * coupon every 3-6 months, capital at end, no amortization What makes you want to take the risk to get 20% return with risk to loose all your capital? 1. If i'm present in a P2P forum, so i'm ready to invest into P2P 2. 20% yield on a real bond, from a solid LO (at least among the less weak) for a long period, with backed assets (cars), if i don't invest, what could i invest in? That's the point raised by southseacompany. If i weren't ready to lose capital, i would put money in a bank account and get my 0.2% p.a. Doesn't Mogo have extreme liquidity issue now? They are issuing loan on the primary market at 20% interest. And currently selling car is a dead market like we can see with Hertz. No one buy when no one can go out. Car default recovery must generate enormous losses. Thats probably why they need so much fresh cash now and that the bondholders are happy to take a big cut. What makes you think it's solid? If they default the legal fees will be big and car won't worth anything.
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Post by jmn on May 26, 2020 21:09:27 GMT
I don't price Mogo assets at zero, may they be used cars, and the compagny itself is quite worthy. This is my opinion, but we obviously don't agree.
Mogo and Iute bonds traded at 95% before covid, now they are 82%, i understood this as an opportunity. So far it's increasing back. 22% yield for three years, with the risk-free rates being zero, so the market estimates Mogo has ~60% chance to go bankrupt before 2023. I bet it's wrong.
In any case it's better than any offer on Mintos, the 20% loans you talk about are the no-guaranteed ones. The long term with guaranty are 16%, with high chance of being bought back early when things go better, like it happened in mid-2019. My 9.5% bond won't get bought back, the yield is in the discount, and i already got it.
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fric
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Post by fric on Jun 8, 2020 12:02:31 GMT
Sure, used car market may be down due to the crisis, BUT collateral for Mogo car loans was bad all the time. Just scroll through those car loans - the average car age is probably 10+ years. We all know how "great" is the used car market (especially in Eastern Europe). When that 15 year old diesel bought with Mogo car loan suddenly cannot pass yearly examination test for emissions or maybe the diesel engine nozzles are dying etc. than yeah, its probably not a 2-4k collateral car anymore, but maybe 1k car now. Its not real estate, old cheap cars can become worthless in a very short period of time very suddenly.
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Post by jmn on Jun 9, 2020 17:01:25 GMT
I'm ready to take the risk, and I'm betting on the safest form of P2P. Real stock exchange, real bonds, the biggest LO, and collateral. Maybe cheap used cars, better than nothing. Said differently, if I was afraid of those bonds, so i wouldn't even have registered this P2P forum at first place. I've been hit hard by the Cashwagon default, but i cashed-out 75% of my portfolio before, to buy those bonds, so even if they default, i'd have no regret  |
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georgi
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Post by georgi on Jul 11, 2020 14:01:06 GMT
Interesting topic – I haven't invested in bonds before but to me it looks like the risk is similar if not lower than buying loans from the same LO on Mintos.
I have a question – I have an account with Interactive Brokers and I can find the Mogo-22 bond, but it would only allow me to buy a minimum of 100 bonds. Where how can you buy fewer of them? I would buy a few but certainly not 100. Thanks!
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Post by geldregiertdiewelt on Jul 11, 2020 21:43:32 GMT
The risk profile of these bonds is substantially the same as similar loans on Mintos, so the same argument applies there. One can ask: if you wouldn't buy debt of some of the highest-rated LOs at a ~20% yield, would you buy anything on Mintos? Why? Mogo doesn't pass my smell test because of the leverage. Used car prices could be impacted by liquidating fleets. For example Hertz, which went bankrupt last week, could well end up in liquidation. Three thoughts: In a crisis like this, if households (have to) reduce their spending, I would expect it’s first the new car business that takes a beating, while used cars should still be in demand. If you check the Mintos statistics, you will find the car loans across all respective lenders, not just Mogo’s, are doing better than other loan types. Why is this the case? Because it’s just easier to let general purpose loans go delinquent than it is to skip car payments. If you have a car, you can still drive to work and back, or drive up to an interview to get a new job, and manage your life. If you’re late paying back other loans or your credit card debt, you can still get through some weeks or months ahead. If they come and take your car, things become much more difficult. That’s why I think that especially in the current situation it may be a good idea to focus on car loans, or buy Mogo bonds. (Besides your car the only other thing you need to hold tight and keep in working order is your phone.) And yes, Hertz is also about cars, but if you look at the details, it’s a completely different story. There is no correlation with the geographies, customers, or kind of used cars Mogo is dealing with.
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Post by jmn on Jul 12, 2020 12:10:25 GMT
Interesting topic – I haven't invested in bonds before but to me it looks like the risk is similar if not lower than buying loans from the same LO on Mintos. I have a question – I have an account with Interactive Brokers and I can find the Mogo-22 bond, but it would only allow me to buy a minimum of 100 bonds. Where how can you buy fewer of them? I would buy a few but certainly not 100. Thanks! Hello, So far I found only two decent brokers for the LO bonds, all those bonds listed on Frankfurt Börse: Interactive Broker and Degiro. The other bonds listed on Nasdaq Baltic like DelfinGroup are unreachable and have no liquidity at all. They are OTC-only bonds whose actual price is obscure. Sad I would have liked to invest in some of them. Your bond, www.boerse-frankfurt.de/bond/xs1831877755-mogo-finance-s-a-9-5-18-22has a minimal tradable unit of 1000€ nominal (before discount and fees). I'm surprised IB asks for a 100'000€ minimum. Maybe switch to Degiro? It's free, except for an annual fee of 2.5€ to access Frankfurt Börse market (negligible...). Following-up my previous comments, I'm moving most (not all, but most) of my P2P investments to the LO bonds. After having been hit hard by the Varks then Cashwagon defaults, I didn't lose faith in P2P investments. I had been a big investor in non-bank or frontier financial sector for years, somewhere between Nomad Capitalist and P2PMillionnaire, with yield ~9-10% and had never lost a penny so far. Then I tried higher yield starting from end 2019 with 25% loans from Varks and Cashwagon, and lost big.So i'm flying back to Quality and similar yields.First, I want Originators who are big and strong enough to have either their own P2P platform or Bonds listed on a regulated market.I also exclude UK Originators not to take any currency risk on the GBP. I'm ok with USD, but not GBP.
Despite this forum is about Mintos, let me list all the non-bank finance companies I'm currently taking a look at. Viainvest, Peerberry: I don't have a good feeling about their businesses so I simply never invested. I won't comment.Robocash: Dedicated platform: yes. Bonds: No.I love them. They crossed Covid with no scratch. No delay, no default, and their 14% yield is sweet. But if I had been enthusiast in the past and still happy today, I'm afraid about their future. Among their markets are Robocash VN which is the exact same as Cashwagon VN, so I cannot see how they could avoid closure at short time (either forced or voluntary) and KZ, which is very competitive and getting complex due to currency and bad economics.Maybe they will do the good evolutions to a saner model, and I wish them the best, but I prefer not to have money invested until they move to higher quality markets. The platform itself is flawless with good support and intraday withdrawals.Creditstar: Dedicated platform: yes. Bonds: Yes (Baltic)This is quite the opposite of Robocash in experience. I had a lot of surprises. Some good, some bad. They hadn't defaulted, and I don't think they will at short term, and they fixed their pending payments issues on Mintos. They applied retroactive Terms changes on Lendermarket (extensions) but also retroactively raised the old 12% yield to 15%. Both good and bad news. I'm still quite unhappy for now, even if I understand they did it in a Force Majeure context. I have loans in Mintos like this one which bears a weak 10% yield and is extended forever. But the nice 18% loans, they, of course all got bought back... Unfair. They recently issued Bonds with 14% yield for a 2021 maturity, while they used to need only 7% for a 2022 previously. I couldn't figure out the discount they offered, if any. And their business model is also close to Cashwagon: online instant loans with 1% per-day rate. As countries apply caps on rates they will be hit. Beyond the surprise-changing Terms, the platform is as good as possible with intraday withdrawals. PlacetGroup: Dedicated platform: yes. Bonds: No. I took a look at their new platform Moncera but ended not to invest. 12% for a very long period is not a good enough deal for me. It's very like the 2019 Robocash, but we're in Covid times so 12% with no bonus and a costly exit option (all interests and 0.5% of nominal) is not convincing me. If they list bonds, I could be interested as their business is newer, saner and more aware of the new challenges and issues (like people hating the Pending Payments). Mogo: Dedicated platform: No. Bonds: Yes (Frankfurt) The big brother, the Mintos backbone. I like their business, and as geldregiertdiewelt explained, used cars is a counter-cyclic model, it performs well when people are getting poorer and oil is cheaper. I invested big in the 2022 Bond, as it was still well discounted at the time. It's now closer to its pre-covid price but still cheap. I'm looking at the 2021 too, as a low-risk, lower yield investment, but it has already cancelled its Covid discount. IuteCredit: Dedicated platform: No. Bonds: Yes (Frankfurt) My first big bond investment, and the best so far since I bought it for cheap, and the price rose and rose since. Their business is not fundamentally safer than Placet, and less than Mogo, but they are the only LO on Mintos to have really fulfilled a Group Guarantee and they are moving to serious funding, leaving Mintos for regulated markets. I loved it, even if I had zero Kosovo loans, so I wanted to be invested, and so far I have been right. DelfinGroup: Dedicated platform: no. Bonds: Yes (Baltic) My new favorite Mintos LO. I had tons of their sweet 13-16% loans they issued in the heart of Covid times that all got bought back. It sounds like Creditstar, but they did it the right way. This move is documented in their financial report, they never had any Pending Payment (except the legit ones like weekends/holydays) and they don't artificially extend forever their older low yield loans. So I'm happy in front of people who know how to deal with their money. Unable to invest into their bonds, I use their short-term Pawnbroker (well secured) 8% loans as an indirect Saving account for my treasury, since I don't see a possible loss with jewel-secured loans at a 30 day term. Ferratum: Dedicated platform: no. Bonds: Yes (Frankfurt) We're now leaving the Mintos universe. They are a not-quite-a-bank online loan, payment and card operator, a mix of Creditstar and Revolut. Initially in the decent investable high-yield range, Covid dropped them into the dirty Junk world. Their bonds now offer high yield from a more serious sector than funding of second hand cars in Moldova, but I see them as a fallen angel, closing their businesses, and I don't want to invest into fallen businesses. Buying their bonds would be more playing with the discount than waiting for the coupons. 4Finance: Dedicated platform: no. Bonds: Yes (Frankfurt) The big game. They are very big, very diversified across sectors (ranging from online unsecured lending to real Bank) and geographically (Baltics, North Europe, Americas...). They issue bonds in both USD and EUR. They have been simultaneously hit by Covid and new Regulations, but I bet they will manage this. If they fall, so who could survive? Note their 2021 bond is getting extended to 2022, assuming bond holders agree. As a bond holder I voted in favor, and will receive a +0.5% bonus for having doing such. Yes, it's legal to pay for votes in the Stock Exchange world. So don't stare at the yield, you should recalculate it assuming the bond will be extended +9 months. And the price will probably fall by 0.5% once the vote session is closed (mid-july) like when stocks detach a dividend.
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georgi
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Post by georgi on Jul 14, 2020 11:31:56 GMT
Hey!
That was a great in-depth analysis! It's really unfortunate about the DelfinGroup bond – it looks really promising with 14-15% coupon (depending on the price, of course) and they're one of my favourite LOs as well. The other ones that look good to me are Creditstar and Iute but I already have a lot of exposure to them through Mintos. I'll consider if it makes sense to shift that to their bonds instead. Ferratum and 4Finance are unfamiliar to me, but I'll research them over the weekend probably. I agree with you about Peerberry – I also wasn't able to get any information from them regarding the financials of the AventusGroup that's behind most LOs on the platform.
Thanks! When looking at the bond Interactive Brokers display a message saying that 'Bonds generally trade on Alternative Trading Systems (ATS) which are not exchanges. Quotes displayed on an ATS serve as an "indication of interest" only and do not represent a firm commitment to buy or sell.' Maybe that has to do with it, so I'm not looking at the bond at the Frankfurt exchange but rather on the ATS where they have set a minimum of 100 rule. But that's just my guess. I'll definitely look at Degiro as an alternative option. Thanks for that!
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Post by jmn on Jul 14, 2020 12:18:59 GMT
I've no experience at using IB but the message sounds like they allow only OTC trades (where a trader buys the bonds to other by phone, old style). Be careful, not every Börse Frankfurt bond can be bought on Degiro. The USD ones are almost never available. At same maturity I found the bonds always better than Mintos, except the Mogo where Mintos is still competitive since the short term bond is almost at par now. Meanwhile, my lovely Iute is still rising |
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