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Post by shanghaiscouse on Jun 23, 2020 10:39:13 GMT
The loans are not shares. All Metro needs to do is give each lender the equivalent of an RYI, ie repay outstanding loan balances. Metro would not be having these discussions without checking with the FCA, and the outcome will be seen as rather more favorable than administration. Rs might be over the worst with defaults since most forbearance requests will have already been taken on by the PF.
Agreed the loans are not shares, that is why it is so complicated. Metro would only do a deal at a firesale price, there is nothing intrinsically attractive about RS, we are into vulture territory with the shareholders desperate to save anything they can for themselves. So you will be asked to sell your loans at a discount. Nothing else makes sense. Right now there is an 800m loan book with a provision fund of 5m actually cash funded (the rest is all future this and that). There is no way that will be sufficient. I doubt any lender achieves only 6% bad debts even during non-Covid times.
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Post by lingield on Jun 23, 2020 10:54:40 GMT
It is not possible to ask investors to take a 6% haircut, if it was imposed there would be a legal challenge and then any suitor would walk away. I do not know what the position is re: the quality of the loan book, but I am confident that it could be modelled fairly accurately.
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Post by lingield on Jun 23, 2020 10:57:42 GMT
The equity holders WILL have to lose their equity before investors take a haircut. It seems that RS management are not prepared to do this (yet).
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r00lish67
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Post by r00lish67 on Jun 23, 2020 11:14:20 GMT
The equity holders WILL have to lose their equity before investors take a haircut. It seems that RS management are not prepared to do this (yet). Well, unless RS decide their 'maximum downside case' wasn't maximum enough and impose a haircut prior to the acquisition? Surely they're entitled to do that whenever they like.
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Jun 23, 2020 11:55:36 GMT
Metro are regulated as a bank, so if they buy RS they have to run it with the same regulations as a bank, meaning own the loans and use own capital. I don't think they have the option to continue running RS as a P2P. But the loan book does not belong to RS (except for the defaulted loans transferred to the PF) the loan book belongs to the lenders. So they would have to make a kind of public offer to us for our loans. It is all way too complicated for no great benefit, and very high risk, as buying a book of pre-Covid loans now before the govt schemes expire is a huge unknown. If 2 million people lose their jobs, and with so much moral hazard as all the free government money has created huge moral hazard (half of CBILS loans expected to go bad) then who knows how much of these loans would get repaid? RS shareholders are hoping they can find someone to take it off their hands before it needs another capital injection, but I imagine the most likely scenario now is an orderly wind-up over the remaining life of the loans. I guess this is why they have stopped taking on new investors, because once the directors knew this was a possibility, they had to stop creating new liabilities or else open themselves up to legal action. Could they just set it up as Metro P2P or something under the general Metro name, but separate from the banking arm? Zopa are intending to have their bank and P2P under the same umbrella but separate entities (if it ever happens). Metro Bank is not interested in p2p. They just want to grow the unsecured consumer lending side of the business and see buying RS as a good opportunity to do that.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
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Post by beagle on Jun 23, 2020 12:52:10 GMT
The Access queue is far bigger than the others, that's probably why it appears to be moving more slowly. When the world has returned to normal economic conditions I think RS should take a hard look at the way their products operate and make changes to ensure that this sort of liquidity problem can never happen again. I don't see any future for 'Access' type accounts in P2P as consumer confidence in them has vanished. Maybe they should just offer fixed term products in future? That's assuming Metro Bank even want to continue to accept retail lenders - they may decide to go down the institutional route instead. 100% agree with this
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