coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Jun 22, 2020 17:25:57 GMT
From The Evening Standard:
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Post by lingield on Jun 22, 2020 17:44:21 GMT
Interesting. This is almost certainly genuine, but could be an attempt to get the price reduced by £44,999,999 - which is what I expect to happen. This would then be a significant cushion against loans going bad and probably justifies take the risk.
If Ratesetter walk away, they either need another suitor, equity holders to stump up £45 million or accept that they are in wind down and that they get nothing.
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r00lish67
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Post by r00lish67 on Jun 22, 2020 18:12:14 GMT
From The Evening Standard:
I think this from the article: "Metro, under new management, is keen on Ratesetter’s technology but is not interested in buying out the current £850 million loan book." together with this: "Metro Bank’s takeover plans for Ratesetter could stumble over concerns about its reputation being trashed if the peer-to-peer lender’s existing loans go bad and investors lose money" ..answers most of the questions of the possible deal. As I said in my waffle yesterday, the value RS holds is in their platforms ability to source borrowers. The existing investors are an expensive inconvenience with only the potential for more egg on face. The fundamental problem for Metro/RS have is that the forecasts currently baked into the loanbook are too optimistic and there are in fact losses to be borne by whomever owns it. Otherwise, why wouldn't they want such a great source of profit? So either: a) RS need to cut their profit margin from the deal so that Metro can buy off the P2P investors at par and have done with them, whilst then having extra financial leeway to wind down the loanbook themselves. or b) RS need to revise their forecasts to a realistic level before the acquisition, declare a capital reduction event, impose some level of loss on lenders, and then sell it on, keeping the profit for themselves. The difficulty with a) is that there's then probably too few funds left for golden backscratchers to make it palatable for RS. The difficulties with b) are that RS will pee off their lenders and makes it difficult for the investors to be bought out (legality/challenges?) , potentially forcing Metro to face some of the pain in running down the loanbook against a chorus of displeasure, further tarnishing their already somewhat tarnished brand.
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Post by freefalljunkie on Jun 22, 2020 18:23:44 GMT
Hmmm, not good news, although hard to know whether the paper's 'sources' are merely leaking a few choice words to the media as a means to lower the price. Given the deep, deep sh1t Ratesetter is in they are hardly in a good negotiating position - having to do a deal or face bankruptcy somewhere down the track isn't a good place to start from.
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chris1200
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Post by chris1200 on Jun 22, 2020 18:23:48 GMT
Consumer/retail-orientated p2p is really over, isn't it.
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Post by lingield on Jun 22, 2020 18:26:47 GMT
I don't think (b) is an option.
Also, whilst Metrobank say that they are not interested in the loan book. The article in FT indicated that it could accrue £35 million per annum to Metro's P&L.
Hopefully, this is just a price negotiation strategy and, if Ratesetter do not have an alternative plan then they may have not any option but to accept any terms imposed by Metro (or anyone else). On the scant details I have I would structure the transaction so that the price paid is linked to the 'bad debt' levels. That way, if Ratesetter's management are able to deliver then they will get a few pounds, but if the loan book goes bad Metrobank are protected on the downside. This of course assume that Metro would be prepared to acquire RS for a £1???
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adrian77
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Post by adrian77 on Jun 23, 2020 8:30:17 GMT
in the short-term at least I would agree - shame and IMHO it is down to greed and incompetence by several operators and I think it could have worked Hopefully it will be back but it will need a new business model e.g. 75% of capital guaranteed - in the meantime I am praying RS stay afloat...
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chris1200
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Post by chris1200 on Jun 23, 2020 8:43:07 GMT
in the short-term at least I would agree - shame and IMHO it is down to greed and incompetence by several operators and I think it could have worked Hopefully it will be back but it will need a new business model e.g. 75% of capital guaranteed - in the meantime I am praying RS stay afloat... Personally, I wouldn't put it down to the operators (on the whole). Take-up has been significantly less strong than many people imagined a few years ago, and recent events have shown how extremely vulnerable the model is to a consumer flight from risk. I don't see how you could ever guarantee capital. The only people who can do that are the government, and there's no way they would do so with such an investment product (and rightly so).
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ashtondav
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Post by ashtondav on Jun 23, 2020 8:53:53 GMT
P2p is no more, or less, challenged than any other retail or business lending entity, facing recessionary pressures. Banks and building societies will be equally challenged.
what those other entities do not face is the headwind of a tsunami of uninformed punters who considered these accounts to be much the same as building society accounts but paying 5% or so. P2p should never have been allowed to offer “access” branded accounts, even though their T&C made clear this would only be under certain conditions. They should always have been marketed as 5 year (or whatever the lending term) accounts, and ONLY to financially literate investors.
As in the 2008 GFC, the strong, well financed, well managed will survive and the weak will collapse. In that recession many banks and building societies failed. ZOPA came through it unscathed.
Time will tell which are the strong and which are the weak. Uninformed vitriol, from those who thought they were in an instant access savings account will most certainly not.
Watch this space...
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bt
Sir Bufton Tufton, Jean Paul Sartre Zippy, Bungle, Jeffrey Archer Andre Previn and the LSO Hello
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Post by bt on Jun 23, 2020 9:08:03 GMT
"Metro announced last week that it was in talks to buy Ratesetter"
"But sources said Metro’s board fears that, with Covid hitting people’s ability to repay their loans, there could be a flood of defaults, triggering a surge of bad publicity for Metro as Ratesetter lenders lose their money"
Surely Metro haven't just woken up to this in the last week ?
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chris1200
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Post by chris1200 on Jun 23, 2020 9:15:17 GMT
P2p is no more, or less, challenged than any other retail or business lending entity, facing recessionary pressures. Banks and building societies will be equally challenged.
what those other entities do not face is the headwind of a tsunami of uninformed punters who considered these accounts to be much the same as building society accounts but paying 5% or so. P2p should never have been allowed to offer “access” branded accounts, even though their T&C made clear this would only be under certain conditions. They should always have been marketed as 5 year (or whatever the lending term) accounts, and ONLY to financially literate investors. As in the 2008 GFC, the strong, well financed, well managed will survive and the weak will collapse. In that recession many banks and building societies failed. ZOPA came through it unscathed. Time will tell which are the strong and which are the weak. Uninformed vitriol, from those who thought they were in an instant access savings account will most certainly not. Watch this space... Completely disagree with the part I've bolded. As alluded to in my previous post, these other institutions do not face the same consumer flight from risk in these circumstances. Retail p2p's lending is funded by retail customers who, in times like this, are inclined to withdraw their cash en masse. This causes havoc with the model, as we've seen with countless platforms in the last few months. The same cannot be said of lending funded by institutional cash, or by consumer cash in retail bank accounts. Your second paragraph conflates two issues. I agree (and have posted many times before) that far too many people who had no idea what they were doing invested in these products. But that doesn't have much to do with the flight from p2p we've seen - which has included those who understand the product entirely, but are withdrawing for entirely logical reasons. Your point about 'marketing' the accounts as 5 year is, thus, a bit confusing. It's what the products actually are (i.e. the terms of the product re when you can withdraw etc.) that matters the most in this case, rather than just how/to whom they're marketed. On your third para, the current crisis is incredibly different from 2008. The sharp severity of this recession is like nothing ever seen before - we may see a very sharp recovery too; but this is still something quite novel.
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tjtl
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Post by tjtl on Jun 23, 2020 9:22:36 GMT
Metro haven't (perhaps yet) put out an RNS saying that the talks are off. So for the time being at least discussions are continuing. As others have commented the attractions of RS to MB are the technology, possibly the branding and IP, and the ability to turbo charge MDs consumer lending business. Against that they are buying some fairly questionable assets. I think I am right in saying RS are advised by Lazard - they are no slouches and will be aware that a withdrawal of MBs interest having been made public, will be very painful to RS and their shareholders. I hope that this is MB relaying back to RS feedback from MBs shareholders- (we like the idea of the deal, but price is too rich, and downside too steep) and that sense can prevail with a low-ball offer initially and deferred consideration depending on the performance of the loan book. The alternative is pretty unappealing for RS- no PE firm is waiting in the wings, not hearing of any white-knight. So it may come down to accepting something which preserves the business in some form or nothing which must I fear lead to an orderly write-down. Speaking as someone who holds 0.04% of the dodgy loan book I very, very much hope Lazard earn their fees and get a deal done- this is a case (a genuine case) when from the perspective of an RS investor "a bad deal IS better than no deal". The sadness will be if an RNS comes out saying "talks off"
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r00lish67
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Post by r00lish67 on Jun 23, 2020 9:31:56 GMT
"Metro announced last week that it was in talks to buy Ratesetter" "But sources said Metro’s board fears that, with Covid hitting people’s ability to repay their loans, there could be a flood of defaults, triggering a surge of bad publicity for Metro as Ratesetter lenders lose their money" Surely Metro haven't just woken up to this in the last week ? Well, I'm sure not. The question I have is - if Metro believe there could be a flood of bad publicity due to Ratesetter defaults, then why do RS currently claim the interest coverage ratio is 100% (never mind the capital coverage) based on the "full weighting to the downside economic case" from their Oxford Economics analysts? (of course this is all rhetorical play, both with Metro undermining the value and RS overstating theirs)
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Post by lingield on Jun 23, 2020 10:15:01 GMT
The cost of the sale process will be burning their cash at a phenomenal rate. Lazard's will not be working for free (even if the their fees are highly contingent), lawyers, accountants, data room providers, etc. Not sure how much cash they have but it is going to take a hit! I would be surprised if they negotiated a break fee arrangement.
Whatever is going to happen, is going to happen soon.
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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 12:49:21 GMT
hopefully it does happen soon.
i think retail will take an exit and this will be a loan arm of metro branded as ratesetter loans.
if p2p closes here it will certainly impact the whole industry and see a reduction of p2p as a whole. a shame but ... reality
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