alender
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Post by alender on Dec 6, 2020 20:10:05 GMT
I'm sure somebody else can reply with a more concrate answer, but it is my understanding the large portion of cash right now sitting on the AA's book are for two things. Note these are not my "emotional" views, this is just how the logic/story is looking so far. 1. To fulfill current commitments on tranche based loans (of which there are many)
2. To prepare the accounts to begin relending (this thread)Ignoring 2. for a second, if 1. is not met, what is it you think happens to your loans? They won't magically repay without the funding, therefore they become effectively worthless and any valuation is gonna be smacked down by firstly a pressured sale and secondly the big ol COVID BS will be used too, to fleace lenders further. At worst, some borrowers may legally see themselves out of repaying entirely in court, by stating that the borrower did not meet drawdown agreements in the first place, something which has happened on Lendy and FS resulting in 100% capital loss for investors. So no, I don't want 5% of my cash to put the rest of my portfilio at greater risk, if not certain jeapody due to lack of funding. That isn't reasonble or fair. I imagine that not all drawdowns are 100% of the cash held on accounts, so the rest is most likely to start funding new loans. Now there are many reasons that this is benefical to lenders at least in the medium term. Firstly, it puts less stress on the PF by not needing to use its balances to pay the target interest rate from bad performing loans. Instead this lands on the newly generated loans. Secondly, as has been the entire discussion here, the AA's will avoid "run down" in all effects other than name currently. Thirdly, we can top up the PF though good performing loans, as intended. I really understand that a minority of lenders may want fully out right now, and want access to their rightful part of the cash. But this will put the product as a whole in jeapody, this seems to be AC's argument and they are marching forward under that assumption. There is a aftertaste of self-preservation in all this for AC, which is bitter sweet to some lenders. They have to pick one or the other, they can't sit on the fence forever and they have clearly picked. This is just my understanding, I'm not trying to cause a emotional response, but thats the logic I'm seeing so far. We'll see if it works out, AC is not out of the forest yet.I can understand the reason for holding onto cash for future drawdowns, as you say it is probably the best way to preserve the investments in these loans. However I believe AC have questions to answer in that they promised so much money that is it preventing orderly withdrawal by investors. When I invested I had no idea of the amounts promised by AC of our future repayments as there was never any mention of the sums involved or the affect of these promises in the event of a liquidity crisis.
The argument for re-lending is a big brother approach to investing. If AC start re-lending using excess locked in funds which have been requested under the terms of the AAs this is tantamount to saying we know what is best for you. In effect what AC will be saying is once we have your funds we will not let you have them back until we decide. When I invested in the AAs I always knew I could not withdraw if there are no funds available, however if there are funds available it should be my decision whether to keep these funds with AC to invest or have them returned to me. It feels like AC intend to keep these funds either because they think they know what is best for me or they think it is best for AC so in their eyes the greater good.
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Post by Harland Kearney on Dec 6, 2020 21:31:41 GMT
Drawdown requirements are listed on all loans that require them, any investor has and had access to this information. Of course, that doesn't automatically mean that its easy to predict how much of a impact that may have on liquididty. But the information is there non the less.
For the big brother thing, yes. I do agree to a extent, I mean I agree with you personally, but also strongly support relending so its hard for me to objectively agree. But AC has always had a element of "we know whats best, stop asking questions". We saw this on 227, on the closure of GBBA, the opening of GBBA 2 and its closure. Its a repeating theme and has been something that often sours relations. I've seen people talk about that contracending responses from AC since 2017. However, I really wouldn't want to have funds in the AA accounts if lending stopped. A capital loss wouldn't be off the books at that point, as the PF dwindles and new investor money vanishes.
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dead-money
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Post by dead-money on Dec 6, 2020 21:45:15 GMT
Without new lending a capital loss on the Access Accounts is a racing certainty. 10% of the remaining loans are currently in default and that number will only increase.
So people can bitch and moan all they like, but there's a clear choice between a ~3% cost to exit now (Not a loss!; as you've accured more than that in interest over the last year) or stay onboard and hope the captain can turn the ship around before it hits the iceberg of wind down.
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alender
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Post by alender on Dec 6, 2020 23:13:54 GMT
Drawdown requirements are listed on all loans that require them, any investor has and had access to this information. Of course, that doesn't automatically mean that its easy to predict how much of a impact that may have on liquididty. But the information is there non the less. The problem is that until you are an investor you do not have access to the loan book (as far as I am aware), you then have to become a expert on the AC website and go through all 500+ loans to find out how much AC have promised. AC know this information but have never published it, it would help guide investors on whether to and how much to invest. It has turned out to be a very import piece of information in a liquidity crisis as AC must have known but do not want us to know.
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alender
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Post by alender on Dec 6, 2020 23:36:59 GMT
Without new lending a capital loss on the Access Accounts is a racing certainty. 10% of the remaining loans are currently in default and that number will only increase.
So people can bitch and moan all they like, but there's a clear choice between a ~3% cost to exit now (Not a loss!; as you've accured more than that in interest over the last year) or stay onboard and hope the captain can turn the ship around before it hits the iceberg of wind down.
You may be right but without proper information from AC this is all guesswork and opinions and I take your point about the ~3% cost.
However these accounts are meant to be access accounts and if money is available as much access should be restored as possible, we did not sign up for accounts that will remove access for ever because a liquidity crisis has occurred. It is ACs responsibly to try restore as much access as possible not say access is fine now because you don't have to get the money from us, someone else with give a proportion of what you invested which means we can do what we like with your funds.
Some people may wish to have their cash in these accounts used for new leading but others may wish to have their cash withdrawn. There is nothing stopping investors from either not requesting repayments or reinvesting the repayments, however just because some investors do not want access to their excess cash element it should not preclude other investors getting access to their cash. After all this was the case before the lock in, the difference is now the proportion that is available for withdraw, just because say only 20% is available for withdraw this is no excuse to hold onto the funds and then invest them against the investors wishes and instructions.
The lock in was supposed to be because there was insufficient funds for all the withdrawals, not an excuse to lock in investors in perpetuity so AC can generate new business and fees.
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dead-money
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Post by dead-money on Dec 7, 2020 0:12:13 GMT
"The lock in was supposed to be because there was insufficient funds for all the withdrawals" - And there's the rub.
AC has said there's sufficient funds to cover tranche committments on existing loans, they haven't said much about the ringfencing and provision fund coverage for current defaulted loans and the ever increasing capital reductions on those and other loans, never mind future defaults and capital losses.
I think that silence is telling and that's where the spotlight should be focused, rather than 'will they won't they' on new lending. Obviously they can't with a clear conscience allow at par withdrawals on demand when they know the loan book isn't worth close to par, just some unannounced fraction of that.
The secondary market currently offers a ~3% reduction on the loan book, that feels extremely optimistic, (I've been happy to exit at 6% to reduce my exposure.) Just look at other platforms in wind-down to see what sort of pennies in the pound you can expect from administrators & receivers!
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Post by Harland Kearney on Dec 7, 2020 1:29:08 GMT
Has anybody calculated the size of the PF to the size of the defaulted loans currently, or the % of the loanbook in default? I see numbers between 10-15% throw around here, of course "defaulted" doesn't always mean loss, however in many cases in P2P they are losses or are can kicked down the road long enough that the PF takes a hit in covering the interest payments.
Surely this number has been inflated quite dramatically since Late March due to good loans repaying, no new loans being added & as natural occurance defaults being listed. I've seen the other thread on this board have usally a loan repayment comment at least once every 48 hours, sometimes faster than that.
Discounts got driven down alot, so it does seem "some" investors have confidence in the long term viability of Assetz Capital. I do believe they will see themselves though the crisis, but at what stage will lenders sail though in the AA's to PAR withdrawals? (or just the knoledge that you can) who knows!
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sapphire
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Post by sapphire on Dec 7, 2020 7:22:24 GMT
Looking at the proposal to resume lending in the AA from another perspective.
Isn't there a *huge* assumption/expectation in doing so, that the future will be rosier than the past?
The current state of the AA's (limited withdrawals at Par, limited PF to absorb future losses etc.) is the cumulative result of past decisions and events (bad loans, COVID etc.).
If AA lending resumes, what guarantee is there that its future performance will fare better than that in the past few years?
Unless AC can provide such an guarantee (and I don't expect they can) isn't resuming lending a case of effectively 'gambling' with investor's funds (against the wishes of some) in the hope/expectation that the future performance will be better?
Couldn't the future turn out to be even worse (an even larger proportion of bad loans, 'mother' of COVID etc.), possibly resulting in greater losses, and when the current discount (around 3.4%) could in hindsight be regarded as a missed opportunity?
(Reckoning a bird in hand is worth two in the bush, I decided to cut my losses and exit my (insignificant) exposure to the AA when the discount was around 4%.)
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alender
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Post by alender on Dec 7, 2020 8:54:12 GMT
All the talk of whether there should be a discount is based on how much people estimate the true loans values in the AAs, there is of course other factors, confidence in AC, when can I get my money out and of course the interest rate. As this is well above the rate for FSCS protected accounts some people would be happy to invest at par even if the true value of the loans is x% below par. However some people will look to other investments perhaps a FTSE 100 tracker fund where the expected yield is 3.5% for 2020, rising to 4.2% in 2021 and for a lot of people less tax to pay, 7.5% vs 20% in the basic rate band once allowances have been used.
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ian
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Post by ian on Dec 7, 2020 9:28:17 GMT
If Martin Heelam hasn’t lied and the majority of investors do who wish to remain invested.
Then AC have a deliberate intention of retaining a minimum capital of circa £200m of investors funds in order to ensure their business continues to operate.
Observations:-
1. Irrespective of market conditions- it not unreasonable to expect full return of capital within 60 months when investing in a 30 day account.
2. What a great business model - advertise a 30 day access account retuning between 5.25% - incur losses and operate it as a type of Ponzi scheme initially until the required capital is attained. Then cut the rate of return to investors and hold captive their capital; dripping it out to them from profit earned or in the unlikely event further capital is invested by new investors.
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sapphire
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Post by sapphire on Dec 7, 2020 9:55:29 GMT
At the very least, I think AC need to clarify a few points regarding '..majority of investors who wish to remain invested." in Martin Heelam's response:
1. Does he mean majority by the *number* of AA investors or majority by the *value* of the AA investment held or both?
2. How/on what basis has this 'majority' been ascertained?
The fact that an investor does not currently have an active AA withdrawal request does not IMO imply that they do would turn down a full withdrawal at par and are happy for AA to start lending. I am not aware of a vote being conducted on this point.
I expect there are a number of passive investors who may not have made a withdrawal request say due to lack of knowledge or due to lethargy, but who may vote against new lending if explicitly asked to do so accompanied by a clear and honest communication of the full facts.
Edit: AIUI, (par) withdrawal requests are fulfilled by AC based on the proportion of investment held, rather than on the size of the withdrawal request.
As such I expect some investors may currently have made a partial withdrawal request even though previously (pre SM launch) they may have made a withdrawal request for the full amount. (After SM was launched, one was required to cancel any existing full withdrawal requests to be able to sell at a discount).
So, I don't think a current partial withdrawal request or a partial offer to sell at a discount can be used by AC to correctly infer that the investor wishes to remain invested for the remaining amount in preference to being able to withdraw fully at par. Therefore AC's view/inference that the 'majority' of investors wish to remain invested may be based on incorrect assumptions and needs to be validated by an explicit vote.
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alender
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Post by alender on Dec 7, 2020 9:56:35 GMT
2. What a great business model - advertise a 30 day access account retuning between 5.25% - incur losses and operate it as a type of Ponzi scheme initially until the required capital is attained. Then cut the rate of return to investors and hold captive their capital; dripping it out to them from profit earned or in the unlikely event further capital is invested by new investors.
The AAs function (before lock in) by relying mostly on new money to cover withdrawals and partly on capital repayments. AC stopped all new money coming into the accounts by the SM, they now wish to use the capital repayments to start new lending. With no or very little money for repayments this makes these the non access accounts. These are deliberate and wilful acts by AC to avoid repaying investors money. We have to ask who benefits from these Hotel California accounts, it looks like AC to me, the business model works from them but not for their investors.
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ian
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Post by ian on Dec 7, 2020 11:07:24 GMT
2. What a great business model - advertise a 30 day access account retuning between 5.25% - incur losses and operate it as a type of Ponzi scheme initially until the required capital is attained. Then cut the rate of return to investors and hold captive their capital; dripping it out to them from profit earned or in the unlikely event further capital is invested by new investors.
The AAs function (before lock in) by relying mostly on new money to cover withdrawals and partly on capital repayments. AC stopped all new money coming into the accounts by the SM, they now wish to use the capital repayments to start new lending. With no or very little money for repayments this makes these the non access accounts. These are deliberate and wilful acts by AC to avoid repaying investors money. We have to ask who benefits from these Hotel California accounts, it looks like AC to me, the business model works from them but not for their investors.
I wonder if Heelam’s ‘admission’ that AC that they have funds to repay capital (given the majority wish to stay invested & they have significant cash reserves) actually moves AC into an area where they are deliberately defrauding investors??
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iRobot
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Post by iRobot on Dec 7, 2020 11:49:03 GMT
If Martin Heelam hasn’t lied and the majority of investors do who wish to remain invested. Then AC have a deliberate intention of retaining a minimum capital of circa £200m of investors funds in order to ensure their business continues to operate. Observations:- 1. Irrespective of market conditions- it not unreasonable to expect full return of capital within 60 months when investing in a 30 day account.
2. What a great business model - advertise a 30 day access account retuning between 5.25% - incur losses and operate it as a type of Ponzi scheme initially until the required capital is attained. Then cut the rate of return to investors and hold captive their capital; dripping it out to them from profit earned or in the unlikely event further capital is invested by new investors. Does that £200m include the monies set aside to fund future dev loan tranches and thus protect all lenders? My observation from the Q&A was that there is now sufficient funding ringfenced to cover all forecast dev loan requirements and, as such, AC can now "consider" increasing repayments to those wishing to withdraw. I suspect it isn't possible to substantively confirm the %-value of redemptions repaid to those wishing to withdraw, but I will be looking to see if the £-value does increase over the coming months (re-basing for the capital redeemed). This: don't forget that there's no guarantee of a 'full return' over any timescale; these are - and always were - risky investments and capital is at risk 'irrespective of market conditions'. This: just a silly thought along the lines of 'captive capital' and new investors; maybe it's those new investors who are holding your capital 'hostage' and will release it for a ~3.5% ransom with the SM acting as 'hostage negotiator' 
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ian
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Post by ian on Dec 7, 2020 13:58:32 GMT
If Martin Heelam hasn’t lied and the majority of investors do who wish to remain invested. Then AC have a deliberate intention of retaining a minimum capital of circa £200m of investors funds in order to ensure their business continues to operate. Observations:- 1. Irrespective of market conditions- it not unreasonable to expect full return of capital within 60 months when investing in a 30 day account.
2. What a great business model - advertise a 30 day access account retuning between 5.25% - incur losses and operate it as a type of Ponzi scheme initially until the required capital is attained. Then cut the rate of return to investors and hold captive their capital; dripping it out to them from profit earned or in the unlikely event further capital is invested by new investors. Does that £200m include the monies set aside to fund future dev loan tranches and thus protect all lenders? My observation from the Q&A was that there is now sufficient funding ringfenced to cover all forecast dev loan requirements and, as such, AC can now "consider" increasing repayments to those wishing to withdraw. I suspect it isn't possible to substantively confirm the %-value of redemptions repaid to those wishing to withdraw, but I will be looking to see if the £-value does increase over the coming months (re-basing for the capital redeemed). This: don't forget that there's no guarantee of a 'full return' over any timescale; these are - and always were - risky investments and capital is at risk 'irrespective of market conditions'. This: just a silly thought along the lines of 'captive capital' and new investors; maybe it's those new investors who are holding your capital 'hostage' and will release it for a ~3.5% ransom with the SM acting as 'hostage negotiator' Your correct there is no guarantee however AC tell us they have got this risk covered by the provision fund ?? I don’t think this is silly at all - we have a Director of the company effectively stating they are not prepared to consider reducing their capital base. What is ridiculous is AC are advertising a 30 day account that they have no intention of allowing investors to redeem funds deposited within that timescale. Irrespective Investor Trust has completely gone. They should commit to redeeming investors capital within a reasonable timescale; that may be from institutional investors or Stuart’s brother who could possibly pay out the “minority of investors” himself !
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