chris1200
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Post by chris1200 on Aug 3, 2020 9:38:59 GMT
So we’re basically presuming that, come acquisition, re-investment from existing investors will no longer be allowed? I guess it does seem that way on the face of it... Then bye-bye RYIs! That’s one possibility, just stopping the secondary market entirely. The benefit from Metro/RS’s point-of-view is that this is a whole chunk of admin and logistics, with no revenue attached to it, and there are cost-savings. One fewer major IT system integration - most banks consist of layer upon layer of Russian-dolled legacy IT systems, which are a nightmare to integrate in the first place, and have almost become the central day job to keep running for decades. So I think that will be a major consideration To Avoid. However, it doesn’t absolutely say that, and no *new* investment for investors doesn’t mean no re-investment, and hence not necessarily no RYIs. They could just make the secondary market a swap-shop for loans approaching maturity. The downside for investors, is that you’ve then got the full reinvestment flows seeking a rapidly shrinking pool of investable loans. Essentially, the opposite problem we’ve got now. I don’t think it can remotely soak up the Access-type RYIs, that lot is *still* just going to be locked in for the duration of the loans. However, the 5yr reinvestors would probably see reduced matching interest rates, in equilibrium. The thing that does worry me slightly: if Metro will own the PF, and they are entitled to do interest-rate and capital haircuts of investors to support it (as they are). Would they take a more negative view of the future default rate than current, and imposing earlier or larger haircuts than RS management might do in their place? It’s always a judgement call, however apparently objective the process, it’s easier to decide on one side of the estimate if you’ve got only downside risk on the other side. However, the FCA should keep them honest, as they will have to apply the same internal risk metrics on Metro own new lending as this legacy business, which would make Metro look unstable to the regulator. Gosh, diversifier , you do enjoy writing a somewhat breathless essay, don't you! See my follow-up to this post here, which it looks like you might've missed.
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chris1200
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Post by chris1200 on Aug 3, 2020 9:41:11 GMT
So the expected future income just evaporates and leaves just a few thousand pounds in cash for the provision fund? Why does the expected future income evaporate? This income is surely derived from loans which are already on the loanbook and will remain there until they are repaid?
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ceejay
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Post by ceejay on Aug 3, 2020 9:59:43 GMT
I don't look at it as good news for existing investors. It looks like investments will be returned slowly as borrower's contracts expire. There will be no new investors to buy up contracts. No new borrowers either. I'd say that WAS good news for investors! The alternative being that investments aren't returned slowly because the whole edifice has collapsed! If you were hoping for a return to the good old days, I'm afraid that was never an option.
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Post by scepticalinvestor on Aug 3, 2020 10:13:23 GMT
Given that all I'm concerned about is being able to access my Access funds sometime in the future, this is good news as it reduces the possibility of a messy winddown process. I'll be patient and wait as long as needed (not that I have a choice!  ) and hopefully will get all/most of my capital back at some point in the future. Can't really expect any more than that at this point.
From an industry perspective, seeing one of the sector's oldest, largest and most succesfull (as least perception wise) firms being sold off for an initial payment of a paltry £2.5 million is astonishing. In its 2017 funding round, RS was valued at around £200m. Now it's been sold for £2.5m-12m, after £43m of funding. Wow.
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Post by shanghaiscouse on Aug 3, 2020 10:35:10 GMT
So what this means is that Ratesetter will continue to exist and will wind down our investments, but the question becomes how to maintain the provision fund. The way the deal is structured means that Metro has distanced itself from any obligation to top it up. So it will be coming purely from existing loans. The 50% haircut was an optimistic one designed to show they were facing reality but at the same time not cutting as far as is prudent so they could retain as many investors as possible and avoid looking like in meltdown. So the likelihood is a cut into capital. Presumably they will put the debt collection out to agencies so that RS staff can focus on serving their new owner Metro. Agencies take an additional fee and are more opaque. It gets more like Funding Circle every day.
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coogaruk
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Post by coogaruk on Aug 3, 2020 10:46:23 GMT
Am I the only one who feels a little bit sad. Ratesetter was once a fun exciting British company and at one point there really was a feeling that companies such as this, and Zopa, FC etc. could be the next big tech companies and the sky was the limit. Now it seems that it will be little more than a trading name of metro banks to flog its loans. In these times we desperately need some British tech companies to compete on the world stage, not seeing it at present. It was always going to end this way in my view. In fact I once suggested exactly that during a visit to FC and their response was very dismissive. They really thought they had a product that the banks couldn't touch - in more ways than one!
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coogaruk
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Post by coogaruk on Aug 3, 2020 10:50:52 GMT
The only hope I can think of for RYIs (or at least those nearer the front of the queue) is that, at some point before completion, RS halts new lending (as part of the transition away from P2P), but re-investing is still permitted. In that situation, presumably (perhaps wishful thinking), all such re-investment would go to RYIs. I would guess there wouldn’t be much, but some investors clearly have no clue and are just letting re-investment continue. Don’t see why that would change dramatically as long as RS doesn’t stop it. Why on earth would any sensible lender (ME, for instance!) knowingly continue to reinvest just to fund others money being returned more quickly?
Yes, wishful thinking on your part I reckon. Doesn't mean it won't happen 'by default' though!
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chris1200
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Post by chris1200 on Aug 3, 2020 10:55:57 GMT
The only hope I can think of for RYIs (or at least those nearer the front of the queue) is that, at some point before completion, RS halts new lending (as part of the transition away from P2P), but re-investing is still permitted. In that situation, presumably (perhaps wishful thinking), all such re-investment would go to RYIs. I would guess there wouldn’t be much, but some investors clearly have no clue and are just letting re-investment continue. Don’t see why that would change dramatically as long as RS doesn’t stop it. Why on earth would any sensible lender (ME, for instance!) knowingly continue to reinvest just to fund others money being returned more quickly?
Yes, wishful thinking on your part I reckon. Doesn't mean it won't happen 'by default' though!
I think you've answered your own question and made my point for me, haven't you? You are a 'sensible' investor, who knows what's going on here and knows how to adjust their re-investment settings. Others are not (as clearly shown by how much re-investment is still happening), and may, exactly as you say, continue to re-invest 'by default'. Especially if there was a period in which new lending was limited or halted, only a relatively small rate of re-investment would be quite handy for at least some in the queue.
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adrian77
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Post by adrian77 on Aug 3, 2020 10:57:09 GMT
my thoughts entirely - be interesting to see what effect this has on the release rate - I would guess it would increase slightly as more RYI are cancelled
but that is exactly that a "guess"
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pip
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Post by pip on Aug 3, 2020 10:58:23 GMT
I would hope that the FCA would not bless a transaction which see retail investors suffer, but that may be naive of me. The transaction may be the best outcome for investors but doesn't mean it is a great one. The whole small business loan market has now been near nationalised as the government is offering loans which they know will lose money, all for the good of the economy. This leaves no space for P2P operators as there is just no margin left out there. Therefore ratesetter continuing to operate as a stand alone entity was probably not even viable and at least this deal may save investors from the disaster of a messy collapse, with the associated costs and delays of administration. Ironically one of the best hopes for P2P investors is that borrowers, who are effectively bankrupt, are able to re-finance their loan using the government scheme. So to answer your question, I think investors may well still suffer, but maybe not as much as they otherwise would have. We live in strange times.
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Post by diversifier on Aug 3, 2020 10:59:14 GMT
Gosh, diversifier , you do enjoy writing a somewhat breathless essay, don't you! See my follow-up to this post here, which it looks like you might've missed. I didn’t miss it, your follow-up just didn’t say much😆
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chris1200
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Post by chris1200 on Aug 3, 2020 11:01:15 GMT
Gosh, diversifier , you do enjoy writing a somewhat breathless essay, don't you! See my follow-up to this post here, which it looks like you might've missed. I didn’t miss it, your follow-up just didn’t say much😆 Odd that your post didn't take account of it, then! And some of us take pride in writing succinctly 
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coogaruk
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Post by coogaruk on Aug 3, 2020 11:01:33 GMT
It looks like investments will be returned slowly as borrower's contracts expire. That's how it (p2p) was always meant to work in the first place!
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iRobot
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Post by iRobot on Aug 3, 2020 11:08:10 GMT
Metro paying up to £3m for Ratesetter. Or up to £12m if you take a three-year view. (I would love to know what the KPIs are that trigger the additional £9m!  )
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coogaruk
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Post by coogaruk on Aug 3, 2020 11:12:29 GMT
So what this means is that Ratesetter will continue to exist and will wind down our investments, but the question becomes how to maintain the provision fund. The way the deal is structured means that Metro has distanced itself from any obligation to top it up. So it will be coming purely from existing loans. The 50% haircut was an optimistic one designed to show they were facing reality but at the same time not cutting as far as is prudent so they could retain as many investors as possible and avoid looking like in meltdown. So the likelihood is a cut into capital. Presumably they will put the debt collection out to agencies so that RS staff can focus on serving their new owner Metro. Agencies take an additional fee and are more opaque. It gets more like Funding Circle every day. Are you sticking to your prediction of a "loss of 15-25% of total portfolio" for me?
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) and hopefully will get all/most of my capital back at some point in the future. Can't really expect any more than that at this point.
)