PBL97, H****** R*******

They have, indirectly.  The small print at the bottom of the loan particulars tab says:

EXISTING LOAN
1200000

But it would be good if they made the effective LTV a bit more obvious.

I would expect that if the 1st charge holder called in their security, that they would sell fast (why wouldn't they?) and so the 90-day valuation would be more appropriate than the valuation of £2.9M quoted on the SS "particulars" tab.

The 90-day value is £2,175k. In fact, the bank may very well just let it go for say £2,000. (Am I right in thinking that the 1st charge holder has the right to sell for whatever they choose with no responsibility to the borrower or to the 2nd charge holder to maximise funds raised?). 

In this case, LTV = 68%.

Extract from page 7 of the valuation report (bold is (mine):


There is good demand for the moorings. Moorings can be leased elsewhere along the Thames at

rental figures in the region of £350.00 - £400.00 per linear metre. This very much can be taken as an

average. The best evidence is always going to be what is being paid on the Property. In the case of

the Property, what drives the 'rents' is a mixture of location, accessibility, quality of the moorings

and back up services. The other rents are examples of what is being achieved/quoted at other

moorings where the ‘offer’ will be different.

In the case of the Property there are a number of licenses, all from different start dates and all at

different rates per meter and different sizes. The average from a number of actual lettings equates

to about £700 per linear meter per annum.

In terms of pushing the lettings, this does not appear to have been the priority of the owner who is

an architect and is more interested in the design of the boat houses (they need to be seen to be

believed) and the adjacent ‘house’ that we believe you have a separate charge over. The Borrower

has advised us that he intends to sell both the house and marina hence why the 2 big lettings have

been 'pulled'. He also intends to sell the house and we know is talking to a couple of agents on this.

The 2 may well be sold together as any owner of the house may probably want 'control' over the

marina and what goes on there.

Lower range moorings have power/water but no flush out facilities. The Property has high

specification facilities for moorings. Because of this we are of the opinion that the site would

achieve a rental-mooring figure of about £700 per linear metre supported by the actual average

being achieved.

Does anyone understand what the mean by the sentence in bold?

If the first charge is £1.2M, and this loan is £540k, then the total borrowed is £1.74M.  Based on a full value of £2.9M, the LTV would be 60%, and based on a  90-day value of £2.175M, the LTV would be 80%.  If it were sold for £2M, there ought to be enough after costs/fees to cover both loans, but there wouldn't be much left for the borrower.  A potentially significant risk is that the borrower stops making payments on the first charge, and it takes a while to organise a sale, during which time the late fees, etc., add considerably to the amount owed to the 1st charge holder.

AIUI the 1st charge holder does have some responsibility to other charge holders, and to the borrower, to obtain a 'fair' price, but that no doubt is subject to interpretation and potential litigation.  One way to satisfy that obligation is to auction the property, and if the auction is advertised well enough and not extremely rushed it probably would be enough to avoid the risk of successful litigation.  Having said that, though, auction results can be quite variable, and the more unusual/unique the property the more likely an unpredictable result.