Access Accounts Run Off - by the (rough) numbers (AC)

Do you think this clause may kick in regarding interest on any loans? 

It is the intention of the Directors of APFL that, subject to funds being available, they would agree to pay out under all reasonable circumstances where, firstly, there is a genuine capital loss on a defaulted loan and, secondly, where there is a delayed / missed payment on a performing loan for an Access Account that would otherwise affect it paying target rate (the latter operation does not apply to any discontinued Investment Accounts).

Well, given its just paid 3% ... Id take that as a no. Next question is why is the payment that low

Edit

Just run  the numbers & its right.

About £40m not paying interest so fee charges on about £65m, thats c£50,000 incl some arrears. That leaves bout £280k in the pot which is 3% on £109m

There is precedent as AC used the PF to make payments on AA accounts in May 2020  & on the 30 & 90 day accounts in Dec 2020 to hit the target rate, They, however, didnt use it in July 2020 when the 90 day missed its target rate 

As its a regulatory requirement to inform lenders when the PF is used or quarterly I would assume there have been no further uses but then given AC have been somewhat erratic in their compliance with COBS in relation to PF that may be false

There are about 20 'performing' loans that have failed to make interest payments prior to EOM. Its inevitable where loans are scheduled to make payments on 29, 30, 31 that this will mean some months they make two payments, others none. I suspect the net interest the loanbook is generating isnt sufficient to cover those months when these loans dont make a payment ... thats when the PF should act as a smoothing device.  Not entirely sure that the PF is set up that way, to be able to cover payments for specific loans & then reclaim them when paid. More likely when used it just paid a sum to allow the target to be met then that was replenished as normal from the following months monthly surplus (or not) The problem is that the PF is not likely to be replenished or increased currently so making interest payments would undermine its primary purpose of covering capital losses. 


The late payments today totalled about £38k for AA which would have increased the payout to 3.4-3.5%

What do mean by ringfenced funds? There are funds ringfenced within the provision fund to cover expected losses on loans with a predicted capital shortfall. As per the last PF update (31 Oct) there is currently £6.17m ringfenced. The funds would be released to cover a crystallised loss on the loan, at the discretion of the PF directors. No specific trigger other than AC deciding to do it. This has happened to about a dozen loans since the winddown began. 

Hard to tell retrospectively & I havent been monitoring it in detail

Cumulative £6.28m ringfenced in Oct 22, increased to £6.37m in July, dropped to £6.17m in Oct but that  was likely because two defaults repaid in full so the .2m was moved back to the free PF.

There have been minimal capital reductions during the winddown period and most new default are still at 100% as they are technical rather than formal ie default rate but loan not called in. Last significant capital reduction was #1226 in April

Ill play with some figures later to see what the current predicted capital reduction are in relation to the AA & PF ringfenced coverage

Edit forgot #1122 - certainly doesnt seem to have been an increase in PF ringfencing to reflect that

Edit 2 - done the numbers and on the basis of the current indicated capital reductions the PF has sufficient funds ringfenced to cover the capital shortfalls (Actually slightly more due to amortisation)

As of 31 Jan




Capital outstanding £107.1m


Free Cash £3.7m



Outstanding funding commitments £1.6m (NB AC seem to think it is £2.1m ... havent as yet had chance to locate the 'discrepancy')


Loans 211
Default 33 (includes 4 with nominal amounts) - 14.4m

Arrears £7.97m

No Jan payment £7.07m
Catch up £8.1
Repaid 4 (£430k)


Interest received c505k representing approx 140% of sum needed to pay 4% before the lender fee. Should be full interest this month but capital returned likely to be low due to lack of repayments.

3.5% ... looks questionable to me.