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Post by p2pinvestor1 on Aug 6, 2020 12:09:33 GMT
Ok, due warning - wine-fuelled speculation ahead!  How about MB, in their new MB/RS guise (if / when it happens), approach the existing RS loan holders, offer them a new loan to pay off the RS one (with a suitably foreshortened redemption date) with a shiny new redemption date and at a sparkly new rate which is a couple of % lower than the borrower is currently on. Oh, and <ahem> 'sweeten the deal' with a (compulsory) MB current account and (compulsory) MB credit card - interest free for the first 6m, of course! - for good measure? OK, maybe not all existing RS borrowers. Maybe just the C-grades up ... Leave the Ds, Es (and Fs?) on the old loan book  Any reason that couldn't happen? I have a suspicion some or all of that might be frowned upon by the FRA / FCA - one of the F*A's anyway ...  MB already have a investigation ongoing by the FCA/PRA for incorrectly allocating risk weighted assets. Plus they are planning to apply for AIRB which is far more valuable than what doing the above might achieve. So they have to be on their best behavior for the short term. Once the investigation and AIRB application has been concluded they might become naughty again 
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Post by p2pinvestor1 on Aug 6, 2020 12:20:07 GMT
I think the reasons why MB didn't buy the loan book are:
1) They have their own (odd) risk apatite and might not want to underwrite some of the types of loans.
2) Acquiring these loans suddenly will increase their MREL requirements and trying to raise it in this market will not go down well.
3) Have to negotiate with the lenders on the platform which would be a hassle.
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adrian77
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Post by adrian77 on Aug 10, 2020 15:29:25 GMT
Serious question and I am sorry if it appears stupid
Is it feasible RS/MB can simply sell the existing loan book - guess the question is - how much is it worth? Granted it has income coming in - not sure how much the average cost to lenders is but due to covid 19 we can expect the defaults to rise, true there is a PF as well. Also swap rates are very low at the moment and some of these assets are secured so a complicated one to work out. Maybe somebody would be interested? Personally I would be happy to take a 5% haircut just to get shot of it and 95% of my existing capital returned .
As things stand at the moment I just can't see any substantial repayment in the next 2 years for those of us who are not near the front of the queue.
The last thing I want is a fire sale of the loan book as experience with *unding *ecure has shown just how greedy expensive admiinstrators are....
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Post by bouncycastle on Aug 10, 2020 15:54:49 GMT
One thing is the earn-out clause for management. The extra £9.5 is contingent on profitability from the existing business or running the existing book down is how I translate it. They won’t get out with their and the remaining shareholders allocation if they don’t administer that run off.
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iRobot
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Post by iRobot on Aug 10, 2020 16:14:07 GMT
Serious question and I am sorry if it appears stupid Is it feasible RS/MB can simply sell the existing loan book - guess the question is - how much is it worth? Granted it has income coming in - not sure how much the average cost to lenders is but due to covid 19 we can expect the defaults to rise, true there is a PF as well. Also swap rates are very low at the moment and some of these assets are secured so a complicated one to work out. Maybe somebody would be interested? Personally I would be happy to take a 5% haircut just to get shot of it and 95% of my existing capital returned . As things stand at the moment I just can't see any substantial repayment in the next 2 years for those of us who are not near the front of the queue. The last thing I want is a fire sale of the loan book as experience with *unding *ecure has shown just how greedy expensive admiinstrators are.... I doubt selling the loan book would net anything like 95% of its' written value. You say the last thing you want is a 'fire sale' but I suspect any potential purchaser would regard it as just that - and price it accordingly. I'm not in RS but do have a sum 'trapped' in AC so have been watching this situation with interest as there are parallels (although fewer now the planned acquisition has been announced). I have been pondering how much longer RS can maintain the current queuing system. Would I be correct in thinking that, under the proposals arising from the planned acquisition, as time passes the overall size of the loan book diminishes as the number of borrowers reduce and the ratio of defaulted loans to 'good' loans increases? If so, doesn't there come a point where RS - or the FCA - will have to say "the projections are saying that these people who are either late in the queue or not in the queue at all are likely to suffer a significant capital loss" and call some kind of resolution event; dump the queue and lump everyone in the same pot? With MB effectively wiping their hands of the existing RS loan book I don't see how the acquisition by them significantly benefits existing RS lenders apart from avoiding " greedy expensive admiinstrators" - it doesn't appear to help those late in the queue or absent from it who, it seems to me, are in peril of a truly significant haircut if my ponderings above are correct and the queuing system remains in place. A situation which gets increasingly worse as time passes. I'm hoping I'm wrong. The above seems so terminally bleak, that surely I must be?
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iRobot
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Post by iRobot on Aug 10, 2020 16:18:06 GMT
One thing is the earn-out clause for management. The extra £9.5 is contingent on profitability from the existing business or running the existing book down is how I translate it. They won’t get out with their and the remaining shareholders allocation if they don’t administer that run off. I've posted previously how I would love to know what the KPIs are for that extra £9.5m. Personally I suspect they have less to do with the current loan book and more to do with how the new MB/RS products pan out over the three year period, including whether the existing RS technologies integrate and scale as well as RS will no doubt have promised.
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chris1200
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Post by chris1200 on Aug 10, 2020 16:22:49 GMT
Would I be correct in thinking that, under the proposals arising from the planned acquisition, as time passes the overall size of the loan book diminishes as the number of borrowers reduce and the ratio of defaulted loans to 'good' loans increases? If so, doesn't there come a point where RS - or the FCA - will have to say "the projections are saying that these people who are either late in the queue or not in the queue at all are likely to suffer a significant capital loss" and call some kind of resolution event; dump the queue and lump everyone in the same pot? With MB effectively wiping their hands of the existing RS loan book I don't see how the acquisition by them significantly benefits existing RS lenders apart from avoiding " greedy expensive admiinstrators" - it doesn't appear to help those late in the queue or absent from it who, it seems to me, are in peril of a truly significant haircut if my ponderings above are correct and the queuing system remains in place. A situation which gets increasingly worse as time passes. I'm hoping I'm wrong. The above seems so terminally bleak, that surely I must be? This is a possibility, but I think only a possibility. If the provision fund remains relatively stable (proportional to the remaining size of the loanbook) then I don't think this is a huge concern. Clearly, though, if the provision fund were to diminish to the extent that RS no longer believed it could cover future losses, then we would have a problem. There is, of course, the possibility of reducing interest rates even further before any capital haircuts, though. Although, at that point, one assumes that RS won't in good conscience be able to allow the continual re-investment that some investors still have fully enabled on their accounts (which would mean no more RYI processing). Obviously you're right that all of these concerns are rather more acute for those further back in the queue, though. Although, it's not like those of us closer to the front have advanced much in recent weeks...
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ilmoro
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Post by ilmoro on Aug 10, 2020 16:38:30 GMT
Serious question and I am sorry if it appears stupid Is it feasible RS/MB can simply sell the existing loan book - guess the question is - how much is it worth? Granted it has income coming in - not sure how much the average cost to lenders is but due to covid 19 we can expect the defaults to rise, true there is a PF as well. Also swap rates are very low at the moment and some of these assets are secured so a complicated one to work out. Maybe somebody would be interested? Personally I would be happy to take a 5% haircut just to get shot of it and 95% of my existing capital returned . As things stand at the moment I just can't see any substantial repayment in the next 2 years for those of us who are not near the front of the queue. The last thing I want is a fire sale of the loan book as experience with *unding *ecure has shown just how greedy expensive admiinstrators are.... Reasonable question but needs some definition. What do you mean by sell the loan book? Very little of the book is actually RS loans, majority is P2P loans made by lenders. So do you mean someone would be repaying the P2P loans and then effectively lending their own money to the existing borrowers or do you mean buying the rights to manage the P2P loan book? The two propositions would have very different valuations and the latter would obviously be complicated by a more restricted market as the relevant permissions would be required. Then of course in both cases there is our old friends the regulators FS are not fire selling the loan book, they are, in many cases, it appears, fire selling the defaulted security but thats not the same.
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coogaruk
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Post by coogaruk on Aug 10, 2020 16:48:56 GMT
Serious question and I am sorry if it appears stupid Is it feasible RS/MB can simply sell the existing loan book - guess the question is - how much is it worth? Granted it has income coming in - not sure how much the average cost to lenders is but due to covid 19 we can expect the defaults to rise, true there is a PF as well. Also swap rates are very low at the moment and some of these assets are secured so a complicated one to work out. Maybe somebody would be interested? Personally I would be happy to take a 5% haircut just to get shot of it and 95% of my existing capital returned . As things stand at the moment I just can't see any substantial repayment in the next 2 years for those of us who are not near the front of the queue. The last thing I want is a fire sale of the loan book as experience with *unding *ecure has shown just how greedy expensive admiinstrators are.... With MB effectively wiping their hands of the existing RS loan book I don't see how the acquisition by them significantly benefits existing RS lenders apart from avoiding " greedy expensive admiinstrators" - it doesn't appear to help those late in the queue or absent from it who, it seems to me, are in peril of a truly significant haircut if my ponderings above are correct and the queuing system remains in place. A situation which gets increasingly worse as time passes. Agreed. Except that in my view the queuing system actually reduces the overall chance of a capital haircut.
I base that assumption on the understanding that the Max & Plus markets operate by reinvesting in a similar way to Access? (I couldn't be bothered to look it up)
Scrapping RYIs altogether might improve things even further, as well as providing a 'level playing field' for those who prefer to take their chances with an orderly wind down. After all, why should those who are 'running scared' take precedence over those willing to accept what they signed up to in the first place, with the latter having already swallowed a 50% reduction in interest on the basis that 'we're all in this together'?
Also there always seems to be a large amount of funds queuing in the markets I'm invested in (including Access - at silly rates it has to be said) and long that may continue for the reasons already stated.
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chris1200
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Post by chris1200 on Aug 10, 2020 16:59:13 GMT
Agreed. Except that in my view the queuing system actually reduces the overall chance of a capital haircut.
I base that assumption on the understanding that the Max & Plus markets operate by reinvesting in a similar way to Access? (I couldn't be bothered to look it up) Scrapping RYIs altogether might improve things even further, as well as providing a 'level playing field' for those who prefer to take their chances with an orderly wind down. After all, why should those who are 'running scared' take precedence over those willing to accept what they signed up to in the first place, with the latter having already swallowed a 50% reduction in interest on the basis that 'we're all in this together'?
Also there always seems to be a large amount of funds queuing in the markets I'm invested in (including Access - at silly rates it has to be said) and long that may continue for the reasons already stated.
Access, Max and Plus are all one market. But I'm confused, how can you argue both of these points: " the queuing system actually reduces the overall chance of a capital haircut" and " scrapping RYIs altogether might improve things even further". Although, aside from the inconsistency point, I actually don't think the RYI/queueing system is relevant at all; it's the performance of the loanbook that matters. As to " why should those who are 'running scared' take precedence over those willing to accept what they signed up to in the first place?" - because this is what we signed up for. We signed up for withdrawals that required liquidity. While a queuing system wasn't spelled out in normal times, this is a fairly logical move given the requirement for liquidity. It would be denying this and stopping RYIs altogether that would be changing what we 'signed up for in the first place'.
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adrian77
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Post by adrian77 on Aug 10, 2020 18:30:03 GMT
what I mean is text in blue - these loans must be worth something - not sure if somebody would be interested in the lot as surely some loans are more desirable than others?
At a top level all I meant was could RS get shot of these loans so we aren't kept waiting for years.
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chris1200
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Post by chris1200 on Aug 10, 2020 18:32:43 GMT
Aside from the practical difficulties, if you sold off the best performing loans that would likely always pay in full and on time, you'd be denying the provision fund useful resources to mitigate the not-so-good loans that go on to default.
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adrian77
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Post by adrian77 on Aug 10, 2020 18:39:19 GMT
Personally I think this will ocur in Jan 2021- no evidence just a hunch that will help RS play for time - prove me wrong RS!
I did not research the changes made ref the "access" queue etc - granted I should have been more diligent but I still think it was sneaky.
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coogaruk
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Post by coogaruk on Aug 12, 2020 10:10:34 GMT
Agreed. Except that in my view the queuing system actually reduces the overall chance of a capital haircut.
I base that assumption on the understanding that the Max & Plus markets operate by reinvesting in a similar way to Access? (I couldn't be bothered to look it up) Scrapping RYIs altogether might improve things even further, as well as providing a 'level playing field' for those who prefer to take their chances with an orderly wind down. After all, why should those who are 'running scared' take precedence over those willing to accept what they signed up to in the first place, with the latter having already swallowed a 50% reduction in interest on the basis that 'we're all in this together'?
Also there always seems to be a large amount of funds queuing in the markets I'm invested in (including Access - at silly rates it has to be said) and long that may continue for the reasons already stated.
But I'm confused, how can you argue both of these points: " the queuing system actually reduces the overall chance of a capital haircut" and " scrapping RYIs altogether might improve things even further". Although, aside from the inconsistency point, I actually don't think the RYI/queueing system is relevant at all; it's the performance of the loanbook that matters. There's no inconsistency (contradiction) in what I wrote. The former already provides and the latter if implemented would improve financial stability for the platform.
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beagle
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Post by beagle on Aug 12, 2020 10:14:40 GMT
But I'm confused, how can you argue both of these points: " the queuing system actually reduces the overall chance of a capital haircut" and " scrapping RYIs altogether might improve things even further". Although, aside from the inconsistency point, I actually don't think the RYI/queueing system is relevant at all; it's the performance of the loanbook that matters. There's no inconsistency (contradiction) in what I wrote. The former already provides and the latter if implemented would improve financial stability for the platform. how can a queue system impact the haircut scenario?
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