lobster
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Post by lobster on Sept 5, 2015 11:07:23 GMT
I see that there are large numbers of "units available" for all four of the Midland Trade Finance loans. Although I can't see any obvious problem in the Q&A or in the Activity, I can't help being rather nervous about taking on these loans.
Am I missing something here ?
Is there any obvious reason why these loans should be avoided ?
If not, why are there so many units seemingly readily available ?
Any thoughts much appreciated.
Many Thanks,
Lobster
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Post by bracknellboy on Sept 5, 2015 11:30:29 GMT
I see that there are large numbers of "units available" for all four of the Midland Trade Finance loans. Although I can't see any obvious problem in the Q&A or in the Activity, I can't help being rather nervous about taking on these loans. Am I missing something here ? Is there any obvious reason why these loans should be avoided ? If not, why are there so many units seemingly readily available ? Any thoughts much appreciated. Many Thanks, Lobster No particular reason to avoid: the availability simply reflects the significant aggregate value of the loans. Since they are all to the same company for diversification reasons lenders will only want to hold a total of x across all the loans.
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Post by mrclondon on Sept 5, 2015 11:36:41 GMT
A variety of factors at play here. Firstly it is important to note that all five loans share the same security package but have different maturity dates. - Whilst a re-finance / rollover on AC of these loans is highly likely on maturity, I'm sure I'm not the only lender that has parts in the first tranche for sale, and as £100 slices get sold re-invest the money in the 5th tranche with its maturity date being six months later than the first one.
- Very large loans (say > £1m) are always going to be more illiquid as fewer people use the loan as a parking place for surplus funds as the time to sell will be greater. Self-fullfilling prophecy - and this is £2m in total.
- The security being offered is not easy to assess and place a worst case valuation on it i.e. if the borrower has become insolvent, and varies continuously as the trade deals come and go. Debebture security with no (or little) fixed assets is perceived to be higher risk by many lenders, but in this case there is the mitigation of credit insurance of 90% of the debtor value.
- 10% is not sufficeint to overcome the inertia introduced by the other things I've mentioned.
When the loan switched from TC to AC, I doubled my exposure, and am also slightly surprised that the overhang of availability has persissted so long.
Late Edit to add:
One other factor that may be of interest - the principal of this borrower is, via another of his companies, a loan introducer to AC/TC and possibly other alternative finance platforms. If these loans went sour on AC, the credibility of this principal in the alternative finance sector would be seriously undermined. Its highly likely he would do his upmost to avoid this outcome.
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Post by bracknellboy on Sept 5, 2015 11:51:52 GMT
.....
When the loan switched from TC to AC, I doubled my exposure, and am also slightly surprised that the overhang of availability has persissted so long.
Interesting comment. Any particular reason for taking a larger punt when it moved off TC ? I reduced mine a bit, but only as consequence of taking advantage of the greater flexibility in loan part size.
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Post by mrclondon on Sept 5, 2015 11:56:56 GMT
..... When the loan switched from TC to AC, I doubled my exposure, and am also slightly surprised that the overhang of availability has persissted so long. Interesting comment. Any particular reason for taking a larger punt when it moved off TC ? I reduced mine a bit, but only as consequence of taking advantage of the greater flexibility in loan part size. A mistaken belief there would be more liquidity in the secondary market on AC vs TC  (there is, just not in this series of loans). I have, hitherto, treated TC as an invest till term platform as the fees have made it poor value to sell early.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Sept 5, 2015 13:29:31 GMT
Personally I think the security is the major factor. There is a nervousness, & possibly a lack of understanding, about security that isnt 'hard' ie property. This is probably been compounded by AC not having a great track record with loans without property security, Plumbers, Glasses, Chairs & Phones all went pear-shaped & have generated a fair bit of annoyance amongst lenders to say the least. (Losses seem inevitable on at least one and prolonged recovery on rest) I have to admit when Glasses went, it prompted me to immediately dispose of my MTF holding as 10% just wasnt worth the risk at 75% LTV, though I do have small holdings in #40 & #155 which have better rates & LTV. Noticeable that AC mooted invoice financing product seems to have been very much on the backburner.
Additionally there were a few concerns about performance in the summer updates & although these have been addressed the info is in the docs & therefore not immediately obvious to lenders with will impact perceptions
Not avaliable for GBBA which limits demand. The other loan (non impaired) with significant avaliability #165 which will make up 20% of GBBA holdings & benefits from this demand(GBBA demand currently limited by lack of loans to full other 80% restricting full deployment of GBBA capital, new loans will ease & increase demand for #165)
Maybe lack of understanding of how SM works. While standard lender parts dont take priority over UW stakes, because sales are made at random from parts available, the SM is more liquid than lenders might assume from the large avaliability (mostly UW I suspect) discouraging investment as they fear their ability to sell will be restricted. Surprised how quickly my parts went.
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kermie
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Post by kermie on Sept 5, 2015 13:38:37 GMT
I think standard lender parts take priority over UW stakes (somebody will probably correct me) but if lenders dont realise this they assume that if they invest the large avaliability (mostly UW I suspect) will restrict their ability to sell so they dont take the risk. Surprised how quickly my parts went. Um - maybe your confusing SS with AC? On SS retailer loan parts get sold first, but I don't believe that's the case on AC - I think it's essentially random. That said, I too was surprised how fast my holdings sold down a few months ago.
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Post by pepperpot on Sept 5, 2015 13:47:58 GMT
I've had £20 for sale in t3 for what seems like forever, it was an experiment about 6 months ago to test liquidity. The other tranches sold in a few months but this last one is proving sticky.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Sept 5, 2015 13:54:34 GMT
I think standard lender parts take priority over UW stakes (somebody will probably correct me) but if lenders dont realise this they assume that if they invest the large avaliability (mostly UW I suspect) will restrict their ability to sell so they dont take the risk. Surprised how quickly my parts went. Um - maybe your confusing SS with AC? On SS retailer loan parts get sold first, but I don't believe that's the case on AC - I think it's essentially random. That said, I too was surprised how fast my holdings sold down a few months ago. Yeah, was bit uncertain. Certainly more liquid tha I expected, I shall do a bit of a rewrite.
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kermie
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Post by kermie on Sept 5, 2015 13:55:32 GMT
I've had £20 for sale in t3 for what seems like forever, it was an experiment about 6 months ago to test liquidity. The other tranches sold in a few months but this last one is proving sticky. The whole AC SM is relatively quiet just now: partly the summer period, but mostly this is down to a stalled pipeline, I think. From what I can gather the market activity really does need new loans in order to give lenders a chance to re-balance, sell down a bit, and let new lenders into popular loans. I've been surprised how sticky NLCP (#123) has been - I don't particularly view the credit issues as particular bothersome given I think security is pretty good. I've not been able to sell down any of that since it became tradable again. Where-as LCP (#45) has been a little more liquid and yet I view that as being in a much less healthy state given zero income is being generated (i.e. no tenant). I'd really love to see AC stick some per-loan volume statistics on the site.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
Posts: 11,330
Likes: 11,549
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Post by ilmoro on Sept 5, 2015 14:05:24 GMT
I've had £20 for sale in t3 for what seems like forever, it was an experiment about 6 months ago to test liquidity. The other tranches sold in a few months but this last one is proving sticky. The whole AC SM is relatively quiet just now: partly the summer period, but mostly this is down to a stalled pipeline, I think. From what I can gather the market activity really does need new loans in order to give lenders a chance to re-balance, sell down a bit, and let new lenders into popular loans. I've been surprised how sticky NLCP (#123) has been - I don't particularly view the credit issues as particular bothersome given I think security is pretty good. I've not been able to sell down any of that since it became tradable again. Where-as LCP (#45) has been a little more liquid and yet I view that as being in a much less healthy state given zero income is being generated (i.e. no tenant). I'd really love to see AC stick some per-loan volume statistics on the site. I posted elsewhere how interesting the comparisons were on the various loans that have been permitted distressed sales. The two with 'buffer' issues seem to be considerably less popular than the three without. There is no avaliability on ET which essentially has no security. Probably coincidence.
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Post by pepperpot on Sept 5, 2015 14:13:51 GMT
The whole AC SM is relatively quiet just now: partly the summer period, but mostly this is down to a stalled pipeline, I think. From what I can gather the market activity really does need new loans in order to give lenders a chance to re-balance, sell down a bit, and let new lenders into popular loans. I've been surprised how sticky NLCP (#123) has been - I don't particularly view the credit issues as particular bothersome given I think security is pretty good. I've not been able to sell down any of that since it became tradable again. Where-as LCP (#45) has been a little more liquid and yet I view that as being in a much less healthy state given zero income is being generated (i.e. no tenant). I'd really love to see AC stick some per-loan volume statistics on the site. I posted elsewhere how interesting the comparisons were on the various loans that have been permitted distressed sales. The two with 'buffer' issues seem to be considerably less popular than the three without. There is no avaliability on ET which essentially has no security. Probably coincidence. Size matters!!
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Post by mrclondon on Sept 5, 2015 19:39:27 GMT
... though I do have small holdings in #40 & #155 which have better rates & LTV. Fascinating ! I have marked both #40 and #155 as 'avoid', partly due to weak security, but also in the case of #40 a ridiculously weak balance sheet (at least at the time of the loan drawdown). Whilst I agree in general that debtors / wip / stock have to be regarded with some suspicion as their effective value at the point of borrower insolvency may be close to zero, IMO there are enough mitigating factors with the trade finance loans for the rate of 10% to be a fair assessement of the risk. The LTV quoted on the AC website is a snapshot and will vary on a day to day basis.
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jonah
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Post by jonah on Sept 5, 2015 20:06:44 GMT
The whole AC SM is relatively quiet just now: partly the summer period, but mostly this is down to a stalled pipeline, I think. From what I can gather the market activity really does need new loans in order to give lenders a chance to re-balance, sell down a bit, and let new lenders into popular loans. Very quiet. I've targets higher than my holdings in 20 loans but am barely getting a nibble. I agree that a nice slew of new loans would be great.
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Post by pepperpot on Sept 5, 2015 21:03:55 GMT
... though I do have small holdings in #40 & #155 which have better rates & LTV. Fascinating ! I have marked both #40 and #155 as 'avoid', partly due to weak security, but also in the case of #40 a ridiculously weak balance sheet (at least at the time of the loan drawdown). Whilst I agree in general that debtors / wip / stock have to be regarded with some suspicion as their effective value at the point of borrower insolvency may be close to zero, IMO there are enough mitigating factors with the trade finance loans for the rate of 10% to be a fair assessement of the risk. The LTV quoted on the AC website is a snapshot and will vary on a day to day basis. The power of suggestion! I've just picked up a bit of #40. The last trading update looked reasonably positive, so I'm happy to roll the dice with it in a small way. Much less but not zero in #155. Errm, could you do me a favour and say something negative about #166 please. After all, it is a very high LTV.  I was caught partially on the hop when it went live. Not that I really want any of it you understand, wouldn't touch it with a barge pole...
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(there is, just not in this series of loans). I have, hitherto, treated TC as an invest till term platform as the fees have made it poor value to sell early.
I was caught partially on the hop when it went live. Not that I really want any of it you understand, wouldn't touch it with a barge pole...