Being wound-up, big write offs coming (W)

Blog Post:

22nd September 2020

Wellesley Announces Restructuring Proposal

Wellesley has announced that it has suspended all payments to investors as it looks to restructure following a strategic review conducted with the support of specialist restructuring advisors, Duff & Phelps.

After seven years of trading, liquidity issues have been brought to a head by the Covid19 pandemic and proposed changes in the regulatory environment which mean that Wellesley may no longer be able to raise funding through the issue of listed bonds on Euronext Dublin (formerly the Irish Stock Exchange). As such, Wellesley needs to restructure its business to recapitalise and address these challenges accordingly.

Following professional advice, Wellesley Finance Plc is proposing a Company Voluntary Arrangement (CVA) to its creditors. The CVA offers an alternative to an otherwise disorderly wind-down and likely insolvency which would result in an inferior outcome for all investors. The CVA is designed to provide Wellesley Finance Plc the opportunity to stabilise the business, restructure its balance sheet and provide a better outcome for every investor.

Graham Wellesley, founder and CEO of Wellesley commented:

“Today we are announcing some very disappointing news for all our investors. On behalf of management, I want to express how sorry we are that we have had to take these measures as it impacts all our loyal investors.

“Wellesley has financed over 3,600 much needed new homes across the UK since we launched in 2013. However, in 2020 the business has come under increasing pressure for two unforeseen reasons. Firstly, Covid19 has changed the economic outlook by bringing delays and stress to the property development market. Secondly, recently proposed changes to the regulatory environment have meant that Wellesley would no longer be able to raise funds via its listed bond investment programme which meant that the business model is no longer viable in the new climate.

“Although, the combination of the above factors has had a huge impact on the future liquidity position of the business. Without the ability to raise further funds, there is a funding gap between the completion of loans with borrowers returning funds and the continued drawdown on more recent loans by developers to finish building development projects.

“We have proactively engaged with specialist restructuring advisors to ensure we reach a conclusion that best serves our creditors. The steps that have been taken include an intra-group transfer of the loan book to ensure that it could continue to be serviced thereby protecting, insofar as possible, the interests of the investors. This transfer has already generated a better outcome for asset-backed investors of the Group. In addition to this intra-group transfer, Wellesley will continue with its progress in delivering a resolution which, with the benefit of a CVA, will provide an improved outcome for every investor of the Group which continues to remain our priority.”

What does “(with off)” mean in point 3?

Its a sad day. Wellesley was one of the pioneers of P2P, I have long been a defender of them but they made mistakes and the writing has been on the wall for a while now. It seems pretty clear now that p2p companies just cannot offer 4% + returns to investors on development loans and survive long term. They may be able to remain small/ bespoke and focus on a sector they have good knowledge in but in general such loans are just too unstable. We still wait with baited breath on other P2P companies but the the pool has shrunk significantly in the last year or so.

Does this mean no possible recovery of any p2p legacy outstanding monies?

I have just received the announcement email - and the legacy site is again functioning for login (it was down this morning) - seems everyone gets personalised summary.
In my case forecast (if CVA approved) is for ~50% return of capital+interest on legacy P2P 5Y £10K that was about to mature (all interest owed). That is also after various earlier writedowns where PF withdrawn.
So it could be worse if it works out. Have not read any of the CVA info.

In my case the difference between cva and admin is 5% with the cva potentially paid over 4 years. Would rather put the company into administration given there is no real financial incentive to accept the cva