PBL 20 How much will we get back?

As Mason said very clearly it would be highly improper and legally dubious for Lendy to pay off its own personal debt using a provision fund which was set up with the explicit intention to provide security to investors in peer to peer loans.
It is my strong opinion that the provision fund is a total red herring in this case and should be disregarded as totally irrelevant. The only relevant Factor in my opinion is whether Lendy has the money to pay investors what they are owed when this is resolved and if they do not it means they are virtually insolvent which means that the whole Lendy-saving stream platform is a dead duck and that is a much bigger issue than this individual loan.
I am confident they will pay investors all their capital and interest by making up the shortfall out of their own personal funds which I would believe are quite substantial at this point.
In terms of where losses will occur on the platform I would be looking at a number of other overdue loans to dubious Borrowers before this one. Lendy are very likely to be trustworthy and honour their commitments whereas some of the Borrowers may not well fall into that category.

I think you are being mischievous but on the off chance you aren't as far as I know no company within the Lendy "group " has a banking licence therefore it could not be SS

dualinvestor:  I take your point.  I wasn't trying to be mischievous.  I'm just ignorant of such matters.  I have no accounting -- or any other -- credentials, so I was thinking as an uninformed layman.  When company accounts show 'Cash in bank', does it have to be at a recognised bank?  Or can it be in a petty cash box in a filing cabinet at the back of the office?

Wow. If you have a petty cash box with a few millions in it, can you please let me know where you keep it?

Jeepers:  How did you calculate that? 

I accept that £558/day is £204k/year, and that's 12% of the £1.7M loan.  But IIRC, interest was paid until the loan was declared to be a default, so interest started accruing only from 26/May.  That was about 7.4 months ago, so ISTM that the total accrued interest ought to be about £125k (= 7.4% of £1.7M). 

Have I got that wrong?

If you believe everything SS have told us, you'd be in a very confused state because at least some of it is contradictory. For example, the "Legal position" they posted in the May 2016 update stated "In the event that there is a shortfall then Lendy will pay you a proportion of the recovery proportionate to the amount invested by you in the loan (clause 5.3.1)" (referring to the old terms), but they have said elsewhere that Lendy would be liable for all of the capital in the event of a default because they are acting as borrower under the old T&Cs.

They also go on to say "Whilst it is entirely within the discretion of the directors of the provision fund to make a cash withdrawal from the provision fund, we would be keen to protect our goodwill to ensure that any shortfalls in repayments to investors are mitigated". However, the PF is not a feature of the old T&Cs and the new T&Cs state "If there is a conflict between these terms and conditions and the Loan Contract, the Loan Contract will prevail." At the present time, it is impossible to say for sure whether the SS "legal position" with respect to the PF is correct because there is no written agreement governing the PF and its use (at least not one available to us lenders). This is a position that is very unlikely to be considered satisfactory by the FCA, so may need to be clarified by SS, but as it stands IMHO it would be improper of them to take any money from the PF to cover a loan for which Lendy Ltd is liable and is capable of repaying. If they chose to do so, they would open themselves up to regulatory and/or legal challenge by any lenders not involved in PBL020, whose position as a lender would be materially disadvantaged by such action. It is reasonable for any such lender to conclude at the present time that the PF is held separately for use only when the borrower in the Loan Contract is unable to repay a loan. It seems unlikely this could be the case when Lendy Ltd itself is the named borrower, because their cut of a single months interest on their ~£350m loan book would surely cover any shortfall many times over.


I agree with all of that (and believe SS probably does hold a proportion of the loan). My comment was in relation to what they can do with the PF only.

Perhaps someone should go to the loan's Q&A tab and ask SS who they consider to be on the hook for this one.