What's on the aftermarket?

It's very important to remember that what's happening now is that we're accruing default interest.  Whether we actually receive it depends on the success of the recovery effort.  AIUI, when the proceeds of a recovery are paid out, they go first to returning invested capital, then to paying fees -- and the fees incurred in pursuing a 'hostile' recovery can be substantial -- and then, if there's anything left, to paying the accrued interest.  If there's a shortfall from a full recovery, it's the accrued interest that is reduced.

With respect to FF, I think AC have done an admirable job to arrange the deal they have.  But I still have my doubts as to whether lenders will achieve a full recovery of their capital, much less any accrued interest.  IIRC, the initial payout was 57% of invested capital.  There remain two PGs, each for 50% of capital.  That might look good, but one of those is thought to be worthless.  In that case, the remaining PG might be just enough to cover the remaining capital and a bit accrued interest, though fees will eat into that.  IIRC, AC have said they'll put their fees to the back of the payment queue, but I don't expect that offer extends to the lawyers' fees or the introducer's fees.  So even in the best case, a full recovery of accrued interest looks impossible and, IIRC, AC have admitted that. 

Furthermore, the second PG is backed by a charge on a portfolio of shares, but only to the extent of 36% of invested capital.  If that's all that can be recovered from the PG then, as well as receiving none of the accrued interest, lenders will have a capital loss as well.

One of the beauties of the agreed FF settlement from AC's point of view is that it's going to be a year before it is known how much, if any, of the accrued interest lenders will receive and whether lenders will incur a capital loss.  Until then, of course, AC can claim to have a track record with no losses by  lenders.

Unless, of course, one of the current crop of defaulted bridging loans is finalised and doesn't produce a full recovery for lenders.

As I write this, there are parts of 19 active loans for sale on the Aftermarket.

Is that a record?  More importantly, is that an indication that investors are becoming disenchanted with AC, and are reducing their holdings -- or exiting completely?  Is this a sign of a healthy Aftermarket?  Or something that AC should be very concerned about?

To a certain extent, we should get some info when one of the large loans expecting to be repaid in the near future actually does pay back.  Will a lot of the money released go into other existing AC loan?  Or it will go elsewhere and leave AC with an Aftermarket that has lots more sellers than buyers.

Possibly also an indication that a secondary market can not operate efficiently without a (near) instantaneous deposit system.

Interesting scenario. Personally I'm at my limit with AC for now. I have more than a couple in default and 'enjoying' the 18% - provided of course everything works out okay with these. If those settle then I'm not particularly attracted to what's on offer ATM in the AM. So maybe another strategy required.

As I said on another thread there could be many causes and some of them undoubtedly attributable to AC activities and the events or non-events surrounding some of the loans that have failed to complete. Couple this to the not too brilliant launch of a new interface to customers and some people will almost inevitably become nervous. The most nervous will take a flight to safety and sell, whilst others will like me, will wait patiently to see what happens in the short term. There are more loans due to finish soon and how they are handled will have a major bearing on punters like me!

I remember the good old days when you couldn't snaffle up a loan part for love or bananas and you had to wait a month of Sundays for a loan to drawdown.

Yet did we complain? Well did we? Did we hell. We sat down in front of our computer screens with our salmon paste sandwiches and our mugs of bovril pressing the F5 key until our fingers bled, just waiting for that elusive £20 loan part in some provincial furniture retailer on the verge of bankruptcy to magically appear only to see it disappear again before our very eyes.

Ahh I miss those days.