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Post by ablrateandy on Feb 18, 2016 21:59:58 GMT
There's gonna be a few I suspect....! Proposal document is here
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Post by wiseclerk on Feb 18, 2016 22:12:11 GMT
There's gonna be a few I suspect....! I have flipped through the document and I think you will see that expectation matched. Will be interesting to see the reaction to the proposal.
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Post by ablrateandy on Feb 18, 2016 22:14:34 GMT
It's very different in some ways to what a lot of loans are... but in many ways we think it works better for lenders in this case. Saying that, this is very much a five year growth investment and not a monthly income. Some people will like it a lot but others will not.
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ben
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Post by ben on Feb 18, 2016 22:19:11 GMT
It's very different in some ways to what a lot of loans are... but in many ways we think it works better for lenders in this case. Saying that, this is very much a five year growth investment and not a monthly income. Some people will like it a lot but others will not. My main concern with this would be a five year investment no returns from a company that does not have that long a track record
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Post by ablrateandy on Feb 18, 2016 22:21:51 GMT
The people involved are all pretty experienced in their sectors. Carsten, in particular, has a very long track record in the industry (he started at Maersk in the 1970s). The idea of setting up a self-contained SPV is to ringfence the assets securely. Everything bought and sold goes through that company so there is no mixing of assets or misalignment of interests.
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registerme
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Post by registerme on Feb 18, 2016 22:59:29 GMT
It's a good pitch . A couple of questions:- 1. What's the tax position re the end payout? Presumably all "interest" related tax will fall due on the final payment? 2. £2000/pcm to run the company equates to £120,000 over the life of the loan. That's 20% of the initial loan value, and excludes "director compensation". It's not clear why this figure is as high as it is, or what we'd be paying for. 3. I'm probably missing something obvious, but I don't understand why there's no container related revenue until month seven. Cheers, RM
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Post by ablrateandy on Feb 18, 2016 23:10:17 GMT
I can't give tax advice .... But that is a consideration that people should have.
The 2k is a top-end estimate and would include running an online container trading business.
These cashflows are pretty worst case scenario. I'd expect to be producing revenue by month 4 but we modelled six month cycles to get a better picture of a bad position.
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Post by Butch Cassidy on Feb 18, 2016 23:22:49 GMT
Given this is likely to be a popular offering & there already seems to be "pledged interest" - Will it be fixed at £600k or increased subject to demand? If the former, will investors be able to get meaningful holdings, Say £500/£1000 minimum?
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Post by ablrateandy on Feb 18, 2016 23:30:44 GMT
It'll be interesting to see how popular it is. This is an attempt at traffic management as I would like to accommodate as many people as possible in a way that suits them.
I'm initially saying 600k because we think that that is the size that lets us hide under the radar. If after three months we feel very comfortably under the radar we may accommodate some more but I can't guarantee it happening.
re leasing, it is a very good business (we got offered a 500k lease to a FTSE100 client that would have returned 20% over 5 years with full asset security the other day but we had to say yes/no on the spot. 500k is a bit big but if a 50k one comes along, this company will have the ability to just say yes straight away and leave lenders with a very, very strong underlying asset.
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gt94sss2
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Post by gt94sss2 on Feb 18, 2016 23:33:43 GMT
I can't give tax advice .... But that is a consideration that people should have. Andy, With respect you really need to give a better answer to the question 'What's the tax position re the end payout?' than the above statement. Its fair enough that you can't give specific tax advice to individuals about their circumstances and no one would expect you too - but you must have got some generic advice along the lines of (for example) ' In general, UK taxpayers will be treated as having received all the interest in year 5 and have to pay any tax liability on it accordingly' There was also a thread in the General Forum where you were asking about 'deeply discounted securities' - what became of that proposal? In one of your earlier emails you suggested that this may be suitable for SIPP holders. In relation to this (and the tax issue) will Ablrate be offering an ISA? If so, can we ISA and/or 'bed and breakfast' this investment? Also, while I think about it - the document suggests that directors might take some money out of the SPV? What for? Are you basically saying any return over the 15% will go to the directors? If the IRR doesn't hit 15% who carries the risk? I have to say that I was originally under the impression that this loan would be a for 5 years to C******* Capital - not that their CEO would be an advisor to some form of fund.
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Post by ablrateandy on Feb 18, 2016 23:56:20 GMT
Sorry - I won't even get drawn into "this is generally accepted HMRC practice." I'm not being difficult - I am in no way qualified and given my background I am exceptionally careful on this. I have poked around on a couple of solutions to see if I could come up with a definitive, accountant/HMRC-certified opinion on this as a Deeply Discounted Security or something that would qualify under the Accrued Income Scheme, however that would make it very complicated for lenders. So, in summary, I will leave you with "You should treat the interest payment as you would any other peer-to-peer income when submitting your tax return as I have no reason to believe that this loan will be treated any differently."
Aside from that, the equity holders will, if the vehicle performs receive a residual amount after costs in return for their five years of work. In terms of downside risk, the aim of the vehicle is to eliminate that as far as possible by not over-leveraging and by ensuring that we have asset security via legal ownership, rather than the situation with CC where we only had a legal charge.
There are no external guarantees provided by Directors or any other party in the event of a downside. What I would comment is that we are intending to bring onshore an asset that has a substantial mark-up and we are very comfortable with that. We have no incentive to lose money or to over-stretch. Our incentive is only at the end of five years, only if we stay involved all of the way through and only after we have paid the return to lenders.
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james
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Post by james on Feb 19, 2016 1:05:44 GMT
A bit more background on this one. Mid last year I opined to Andy that the container borrower didn't really need a series of loans but really needed an ongoing working capital facility. I was certainly not the only one who thought that and this is the result. One of the advantages is that it leaves the container expert more time to do what he does best and he doesn't need to wonder if he's going to get more funding when he can use it. For tax management, remember how selling works and you can spread it over at least a couple of years by timing selling. Or three or more if you're willing to leave relatively early. It's a bit sad that the ending date is in Feb rather than late May because that'd make a two year tax split easier and offer the desired buyers before end of tax year a virtual three month loan at anticipated 15% plus or minus what markups/markdowns deliver. Also worth considering that this is a planned exit deal and that is likely to mean that there will be money freed up before the final date that can be distributed. It could be sensible for the directors to look to pay attention to UK tax years when doing that, to spread the bill. A few weeks back I asked one place where I have to ask for interest if they were happy to delay paying interest until after 6 April if I asked. They said yes. Since tax is due normally when it is paid, not when it is accrued, that shifts the tax year. There may be potential for that with this setup. One thing I have done with much of my P2P lending, starting at Zopa in 2008 and again at Bondora three years ago, is take the view that rates at each platform had a significant potential to drop over time, so I preferred five year loans to shorter terms, to lock in the rates. I haven't regretted doing that yet, so far my expectations have been realised. Long term deals where there's at least a prospect of resale for early exit look like a wise move to me. Helps that they also cut down the loan churn workload. Of course I could be wrong, but that's life and my views on the matter. I'm in a group who made an early commitment to lend on this deal so if the business does well and those lenders get paid a bit more, I might get that. See ablrateandy's post for more.
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stevio
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Post by stevio on Feb 19, 2016 6:12:39 GMT
To confirm, is this loan open for pledges now?
I am presuming that the lenders would have a legal charge over the SPV and thus the assets of the SPV (ie the containers)?
Should the SPV be wound up, what priority would be given to the lenders? ie should the SPV have other creditors, directors remuneration, running costs etc, would they be paid first and the remaining funds distributed to lenders? So although this is asset backed, there are the costs of the SPV to take away from the underlying assets should they SPV be wound down?
What would happen if Ablrate went pop? Would the loan still be able to continue/receive the 5yr return? Although you think this unlikely, a lot can happen in 5yrs and the Ablrate platform is relatively new, despite the overall experience of the directors
Thinking out load: - extra 3.4%/year (£34 on the £1k) compared to 12% returns of some platforms - asset backed (via a SPV) - 'restricted' liquidity compared to some platforms - tax planning likely needed
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jonah
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Post by jonah on Feb 19, 2016 6:33:49 GMT
- tax planning likely needed For me this is the problem. I get ablrateandy's point about not being qualified, but not having any view, for example, if the SM is similar to FS's in terms of implications is a concern. I guess 5 years could provide sufficient time for me to become an accountant, but that wasn't really what I envisaged for that period! I probably don't mean planning as in doing the most logical thing to reduce tax liability, I mean it in the sense of understanding what I would owe HMRC.
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blender
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Post by blender on Feb 19, 2016 8:48:30 GMT
- tax planning likely needed For me this is the problem. I get ablrateandy 's point about not being qualified, but not having any view, for example, if the SM is similar to FS's in terms of implications is a concern. I guess 5 years could provide sufficient time for me to become an accountant, but that wasn't really what I envisaged for that period! I probably don't mean planning as in doing the most logical thing to reduce tax liability, I mean it in the sense of understanding what I would owe HMRC. If you hold it to term then presumably you will pay tax on the whole of the interest when it is paid, in one go and at your tax rate in 5 years time. If you do not fully expect to hold it for five years (and to live that long) then probably it is something to pass by (as it is for me) - or you need that full understanding of the likely SM discounting operation, the tax implications, and the general expected success of Ablrate. Though it is not for me, it is good that Albrate provides different types of lending opportunities/ asset classes - something of a USP.
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