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Post by 4thway on Jun 17, 2015 8:47:52 GMT
I'm a bit late coming to this but I think you have confused the Wellesley ISA with the Wellesley mini bond. The mini bond is indeed not P2P lending, it is a risky retail bond - "Funds used for lending and business expansion". The ISA however is different - " Bond proceeds can only be used to make loans that are secured against tangible assets". Unlike the mini bond all the funds are used for p2p loans. This is also covered in the 'This is Money' article at www.thisismoney.co.uk/money/investing/article-2956979/Should-invest-Wellseley-s-P2P-retail-bonds.html"And, if Wellesley went bust, how would [p2p] lenders and [ISA] bondholders be treated?
A spokesman said: 'They are completely ‘pari-passu’ i.e. treated on an equal footing. In the unlikely event Wellesley went bust, the company has a security trustee that would manage the run-off of its loan book. All funds related to the bond issue are held in a secure bank account which is ring fenced from the rest of the Wellesley business.'"
Thanks a lot, 2boi. I'll look into it again to see if I was confusing the two. The way I interpret what you've written/quoted above, it doesn't necessarily contradict my article. The funds can be ring-fenced so that the rest of the Wellesley business can't use them for other purposes, e.g. expansion, and the loans can be pari-passu so that if one loan defaults the creditor in that loan - in this case Wellesley Finance - is treated equally to its individual P2P investors (the other creditors), but that doesn't necessarily mean that other Wellesley creditors (e.g. banks that Wellesley owes money to) can't demand a cut of Wellesley Finance's proceeds in the event that it went out of business. I'll take another look! Neil
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2boi
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Post by 2boi on Jun 18, 2015 12:40:50 GMT
To assist, I have since established that the ISA ('Listed bond') also qualifies for the Provision fund, in the same way as the direct P2P loans. I am pretty sure the mini bond doesn't.
email to Wellesley:
Are the loans made via the ISA fund protected by the Provision fund in the same way as the P2P loans? i.e can an ISA holder apply to the discretionary Provision Fund for compensation in the same way as a p2p lender?
response
Dear Thank you for your email. As the funds raised by the Wellesley Listed Bond go towards the same loans that are funded by our Peer to Peer terms they hold the same security for the lender. In the event that a borrower were to default on a loan repayment we would first seize and sell the property asset associated with the loan, if this did not cover all the loss made then we would apply to the Provision Fund on your behalf. If you have any further questions please do not hesitate to contact us. Kind regards, info@wellesley.co.uk
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spiral
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Post by spiral on Jun 18, 2015 14:57:08 GMT
Not an expert here but I suspect the subtle difference is in the "if anything happens to Wellesley". With the direct P2P loans, you still hold them and it will just be a case of some administrator collecting and processing the loans on your behalf.
With the bond(s) I suspect you are lending the money to Wellesley, so if they go bust, you may get back nothing whereas if W is still solvent but one of the loans goes belly up, they will claim on the provision fund, thus you don't lose out.
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2boi
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Post by 2boi on Jun 19, 2015 0:59:38 GMT
Here's what Wellesley say in general about that: What would happen to matched funds if Wellesley & Co entered administration?
We have an independent security trustee to ensure that in the event of Wellesley entering administration, our loan book is put into orderly run-off which means that outstanding loans are still processed.support.wellesley.co.uk/hc/en-gb/sections/200461603-Operator-InsolvencyI'm pretty sure that applies to the listed bond (ISA) too (but not the mini-bond of course)
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Post by 4thway on Jun 21, 2015 8:45:45 GMT
I'm a bit late coming to this but I think you have confused the Wellesley ISA with the Wellesley mini bond. The mini bond is indeed not P2P lending, it is a risky retail bond - "Funds used for lending and business expansion". The ISA however is different - " Bond proceeds can only be used to make loans that are secured against tangible assets". Unlike the mini bond all the funds are used for p2p loans. This is also covered in the 'This is Money' article at www.thisismoney.co.uk/money/investing/article-2956979/Should-invest-Wellseley-s-P2P-retail-bonds.html"And, if Wellesley went bust, how would [p2p] lenders and [ISA] bondholders be treated?
A spokesman said: 'They are completely ‘pari-passu’ i.e. treated on an equal footing. In the unlikely event Wellesley went bust, the company has a security trustee that would manage the run-off of its loan book. All funds related to the bond issue are held in a secure bank account which is ring fenced from the rest of the Wellesley business.'"
Thanks a lot, 2boi. I'll look into it again to see if I was confusing the two. The way I interpret what you've written/quoted above, it doesn't necessarily contradict my article. The funds can be ring-fenced so that the rest of the Wellesley business can't use them for other purposes, e.g. expansion, and the loans can be pari-passu so that if one loan defaults the creditor in that loan - in this case Wellesley Finance - is treated equally to its individual P2P investors (the other creditors), but that doesn't necessarily mean that other Wellesley creditors (e.g. banks that Wellesley owes money to) can't demand a cut of Wellesley Finance's proceeds in the event that it went out of business. I'll take another look! Neil I've had another look at this and don't see any reason to change my article. If a loan goes bad, yes, any losses after the provision fund will be pari-passu between the ISA and Wellesley's peer-to-peer lending customers. But Wellesley Finance is the lender in the ISA. Which means if Wellesley Finance goes out of business and it has racked up serious debts with banks etc, those banks are going to take a cut of the proceeds received from borrowers. Nothing that anyone has written in this thread contradicts that (e.g. how repayments/recoveries are allocated to P2P lenders on one side and Wellesley Finance on the other). Wellesley's own website also states: ISAs
Peer-to-Peer lending is not currently eligible for ISAs. However, under the New ISA scheme the Government has announced its intention to include Peer-to-Peer lending.
It has not yet been confirmed when this will happen, however if you would like to receive our ISA updates, Sign up here:Neil
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Post by 4thway on Jun 21, 2015 8:49:30 GMT
Thanks a lot, 2boi. I'll look into it again to see if I was confusing the two. The way I interpret what you've written/quoted above, it doesn't necessarily contradict my article. The funds can be ring-fenced so that the rest of the Wellesley business can't use them for other purposes, e.g. expansion, and the loans can be pari-passu so that if one loan defaults the creditor in that loan - in this case Wellesley Finance - is treated equally to its individual P2P investors (the other creditors), but that doesn't necessarily mean that other Wellesley creditors (e.g. banks that Wellesley owes money to) can't demand a cut of Wellesley Finance's proceeds in the event that it went out of business. I'll take another look! Neil I've had another look at this and don't see any reason to change my article. If a loan goes bad, yes, any losses after the provision fund will be pari-passu between the ISA and Wellesley's peer-to-peer lending customers. But Wellesley Finance is the lender in the ISA. Which means if Wellesley Finance goes out of business and it has racked up serious debts with banks etc, those banks are going to take a cut of the proceeds received from borrowers. Nothing that anyone has written in this thread contradicts that (e.g. how repayments/recoveries are allocated to P2P lenders on one side and Wellesley Finance on the other). Wellesley's own website also states: ISAs
Peer-to-Peer lending is not currently eligible for ISAs. However, under the New ISA scheme the Government has announced its intention to include Peer-to-Peer lending.
It has not yet been confirmed when this will happen, however if you would like to receive our ISA updates, Sign up here:Neil A simple hypothetical example: 1. Wellesley's P2P lenders are owed £50 million by property borrowers. 2. Another £50 million has been lent to Wellesley Finance in its ISAable bond and Wellesley has lent this money to property borrowers. 3. Wellesley Finance borrows £50 million from some banks and others. 4. Wellesley Finance goes out of business. 5. All outstanding property loans are repaid in full as the loan book is wound down. 6. (Assume, for simplicity, there are no extra costs due to administrators taking over.) 7. Wellesley's P2P lenders get there £50 million back 8. Wellesley Finance has £100 million in creditors: £50 million to the bank and £50 million to its ISA bond holders. Wellesley Finance's adminstrators receive their £50 million back from the borrowers. That is split 50/50 between the ISA bond holders and the bank, so everyone takes a 50% hair cut. Neil
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spiral
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Post by spiral on Jun 21, 2015 9:21:09 GMT
A simple hypothetical example: 7. Wellesley's P2P lenders get there £50 million back 8. Wellesley Finance has £100 million in creditors: £50 million to the bank and £50 million to its ISA bond holders. Wellesley Finance's adminstrators receive their £50 million back from the borrowers. That is split 50/50 between the ISA bond holders and the bank, so everyone takes a 50% hair cut. Neil So you are confirming my earlier statement that there is a distinct risk difference between the ISA bond and P2P investing even though the isa bond is being used for P2P investing i.e. the bond wrapper has business risks associated with it that the direct lending doesn't.
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Post by 4thway on Jun 21, 2015 11:08:18 GMT
A simple hypothetical example: 7. Wellesley's P2P lenders get there £50 million back 8. Wellesley Finance has £100 million in creditors: £50 million to the bank and £50 million to its ISA bond holders. Wellesley Finance's adminstrators receive their £50 million back from the borrowers. That is split 50/50 between the ISA bond holders and the bank, so everyone takes a 50% hair cut. Neil So you are confirming my earlier statement that there is a distinct risk difference between the ISA bond and P2P investing even though the isa bond is being used for P2P investing i.e. the bond wrapper has business risks associated with it that the direct lending doesn't. Yes, although it's still likely you'd get something back, since you'd be a creditor and property borrowers would continue to repay.
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2boi
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Post by 2boi on Jun 24, 2015 2:07:28 GMT
Yes I can see the possibility of 'Wellesley Finance' borrowing money from banks but I hope it is covered in "B.25 Secured assets" of the prospectus: "The Issuer Security will secure all Notes issued by the Issuer from time to time. The proceeds of any issuance of Notes by the Issuer will either be held by the Issuer in the Issuer Collateral Account.. or be lent to a Borrower pursuant to a Borrower Loan Agreement. By granting the Issuer Security to the Trustee for the benefit of the Issuer Secured Creditors, the rights of the Noteholders and the other Issuer Secured Creditors to the Issuer Security rank first in priority to other creditors in the event of a default or an insolvency or insolvency related event of the Issuer.[my bold] "www.wellesley.co.uk/prospectus-archive/I take that to mean that both the noteholders' cash (before loans are made) and the loans their cash goes to are ringfenced - the cash in the 'collateral account' and the loans' asset security is prioritised to the note holders. So worst case is Wellesley finance folds and all the borrowers default. The noteholders then have access to the security of the loans (which hopefully is still more than the value of the loans). If there is anything left after that then the banks can claim it. I agree Wellesley have not made it as clear as they should. The best they say is " Bond proceeds can only be used to make loans that are secured against tangible assets, which means that in the event of a borrower default the security can be sold" for the listed bond. For the minibond (which isn't entirely asset backed and does carry the risk you mention) they say " Funds raised through the Wellesley Mini-Bond are used for asset-backed lending and business expansion." support.wellesley.co.uk/hc/en-gb/sections/200852339
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2boi
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Post by 2boi on Jun 24, 2015 2:33:59 GMT
Not an expert here but I suspect the subtle difference is in the "if anything happens to Wellesley". With the direct P2P loans, you still hold them and it will just be a case of some administrator collecting and processing the loans on your behalf. With the bond(s) I suspect you are lending the money to Wellesley, so if they go bust, you may get back nothing whereas if W is still solvent but one of the loans goes belly up, they will claim on the provision fund, thus you don't lose out. That is a perfect description of the Wellesley minibonds. Some of the minibond cash is lent out to asset backed loans, some is lent to Wellesley itself. Wellesley don't say what the split is but clearly the money that goes to Wellesley is vulnerable to Wellesley folding. Their P2P ISA ('listed notes') is different. The issuer of the notes is Wellesley Finance PLC a different company to Wellesley (Wellesley call them a 'sister' company). Wellesley Finance PLA could (I think) borrow other monies and could go bust. However the prospectus for the listed notes gives priority access to the borrowers' assets to the note holders, and the note holders' money is only used for the asset backed loans. Trustees enforce this. The prospectus doesn't seem abnormally complicated but it is, like most, a pain to read through. As far as I can tell the issuer trustees are US Bank Trustees Limited, part of Elavon, which is part of US Bankcorp, which is the parent company of the fifth biggest bank in the US. All the above is just my reading of the prospectus and my research, don't rely on it!
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Post by lb on Aug 13, 2015 8:40:06 GMT
I've had another look at this and don't see any reason to change my article. If a loan goes bad, yes, any losses after the provision fund will be pari-passu between the ISA and Wellesley's peer-to-peer lending customers. But Wellesley Finance is the lender in the ISA. Which means if Wellesley Finance goes out of business and it has racked up serious debts with banks etc, those banks are going to take a cut of the proceeds received from borrowers. Nothing that anyone has written in this thread contradicts that (e.g. how repayments/recoveries are allocated to P2P lenders on one side and Wellesley Finance on the other). Wellesley's own website also states: ISAs
Peer-to-Peer lending is not currently eligible for ISAs. However, under the New ISA scheme the Government has announced its intention to include Peer-to-Peer lending.
It has not yet been confirmed when this will happen, however if you would like to receive our ISA updates, Sign up here:Neil A simple hypothetical example: 1. Wellesley's P2P lenders are owed £50 million by property borrowers. 2. Another £50 million has been lent to Wellesley Finance in its ISAable bond and Wellesley has lent this money to property borrowers. 3. Wellesley Finance borrows £50 million from some banks and others. 4. Wellesley Finance goes out of business. 5. All outstanding property loans are repaid in full as the loan book is wound down. 6. (Assume, for simplicity, there are no extra costs due to administrators taking over.) 7. Wellesley's P2P lenders get there £50 million back 8. Wellesley Finance has £100 million in creditors: £50 million to the bank and £50 million to its ISA bond holders. Wellesley Finance's adminstrators receive their £50 million back from the borrowers. That is split 50/50 between the ISA bond holders and the bank, so everyone takes a 50% hair cut. Neil If you are going to give an example situation, it should be one where there isn't enough money to pay everyone ... so, my understanding is that a priority order in the case of any platform failure is: 1. P2P 2. Bonds (inc ISA money) and other creditors that we have no idea what they could be or what priority they have. other creditors (if banks are involved) will almost certainly have priority to bond holders also - all you are doing buying a bond is lending to a company. which means if the company fails, bondholders can expect close to a 100% loss. this all being the case, not only is your article completely misleading but the statement (apparently from W) is totally wrong. How can they possibly say that P2P investors and Bond holders will be parri passu. I suspect the person saying that doesn't actually understand how it works. the alternative is that it was intentionally misleading. The current bonds or isa bonds are not P2P money. The IFISA will change that but for now, it is not. Can W please confirm the priority order to each type of investor.
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Post by 4thway on Aug 13, 2015 9:14:05 GMT
A simple hypothetical example: 1. Wellesley's P2P lenders are owed £50 million by property borrowers. 2. Another £50 million has been lent to Wellesley Finance in its ISAable bond and Wellesley has lent this money to property borrowers. 3. Wellesley Finance borrows £50 million from some banks and others. 4. Wellesley Finance goes out of business. 5. All outstanding property loans are repaid in full as the loan book is wound down. 6. (Assume, for simplicity, there are no extra costs due to administrators taking over.) 7. Wellesley's P2P lenders get there £50 million back 8. Wellesley Finance has £100 million in creditors: £50 million to the bank and £50 million to its ISA bond holders. Wellesley Finance's adminstrators receive their £50 million back from the borrowers. That is split 50/50 between the ISA bond holders and the bank, so everyone takes a 50% hair cut. Neil If you are going to give an example situation, it should be one where there isn't enough money to pay everyone ... so, my understanding is that a priority order in the case of any platform failure is: 1. P2P 2. Bonds (inc ISA money) and other creditors that we have no idea what they could be or what priority they have. other creditors (if banks are involved) will almost certainly have priority to bond holders also - all you are doing buying a bond is lending to a company. which means if the company fails, bondholders can expect close to a 100% loss. this all being the case, not only is your article completely misleading but the statement (apparently from W) is totally wrong. How can they possibly say that P2P investors and Bond holders will be parri passu. I suspect the person saying that doesn't actually understand how it works. the alternative is that it was intentionally misleading. The current bonds or isa bonds are not P2P money. The IFISA will change that but for now, it is not. Can W please confirm the priority order to each type of investor. Hi lb. Sorry that the hypothetical example is not clear, but it is indeed a situation where there's not enough money to pay everyone. £100 million has been lent to property borrowers through P2P lending or the bond and Wellesley has, in addition, borrowed £50 million for its own purposes, e.g. expansion. So there's £150 million in borrowing and just £100 million in property loans. A shortfall of £50 million. If you look at point 8, you can see that Wellesley's other creditors are rated (at best) "pari-passu" with its bondholders. This means that they share the proceeds equally. So bondholders should get no less than 50% of the proceeds in this example, although if the "other" creditors were owed £500 million nstead of £50 million that would be a different story! Regarding another point of yours, the hypothetical example doesn't state that P2P investors and bondholders are pari-passu. P2P investors' loans are ringfenced and protected for themselves. It is bondholders and other creditors, such as banks that Wellesley has borrowed from, who are pari-passu or, if they are not, the other creditors are due to be rated below bondholders in the queue. Neil
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Post by lb on Aug 13, 2015 9:27:10 GMT
the above reply (apparently from W) makes it very clear that
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"As the funds raised by the Wellesley Listed Bond go towards the same loans that are funded by our Peer to Peer terms they hold the same security for the lender"
...
this is not true and is totally misleading
your article, by failing to clearly point this out, is therefore adding to the misconception.
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james
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Post by james on Aug 14, 2015 11:22:04 GMT
I'm puzzled by this in the article:
"Wellesley should share an equal recovery with the Wellesley P2P lenders, e.g. 95p in the pound.
But that doesn’t necessarily mean that bondholders will get all that 95p. Because Wellesley might have borrowed from others, e.g. banks, which get a cut too."
Which Wellesley borrowed from otherrs? The Wellesley that runs the P2P platform or the Wellesley ISA company that for the ISA only does secured lending?
How do you believe that the different company that is doing the ISA investing does not get all of the 95% share it's entitled to from the loans? That then leaves just 5% from any protection funds and such that is exposed to the platform Wellesley's financial situation.
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