Ke** Bridging Loan 1.25% per month

Thanks Ton ⓉⓞⓃ - I read through the Q&As before asking, but obviously didn't pay enough attention.

This one is certainly not looking good and I expect it will probably go the same route as others that are in default. No doubt default interest will be accrued but whether it will be paid or not is debatable. In circumstances when it is becoming fairly obvious that a default will occur, I feel it would be preferable for AC to be far more pro-active before the event otherwise we're into another E*****/I*****/A******/H****** situation to mention just four. Whilst it may be nice seeing the default interest accrue I prefer to be more realistic. Once all the associated costs are taken into account I doubt if we will see it. Or am I just being a pessimist?

What appears to be the case is waiting for the borrower/introducer to make contact with a proposal. I would have thought that it would have been in the interests of everyone if AC took 'the lead' in this area.

Ramblings over.

With 70% LTV loans secured by a first charge on property, I suspect bugs4me is being pessimistic.  But it requires a lot of work and it's a painful process.  And in the end the borrower loses most, if not all, of their equity in their property, so it's potentially devastating for them.  I know I ought to take a objective approach and presume that the borrower was well aware of the risks when they went into the deal, so I shouldn't care if it turns into a disaster for them.  But I'd much prefer it if the exit were less painful for both borrower and lender.  So I'd think it would be better for all concerned if AC were more proactive in default cases and started trying to work out a mutually acceptable solution with the borrower sooner rather than later, possibly starting even before the maturity date of the loan.

AC seem to be trying this approach at Hackney, though it did take them a few months to become proactive.  Perhaps if Hackney turns out successfully it will encourage AC to do more of this in the future.

More ramblings. In this case I don't think we have much to worry about other than one factor and that is, was the original valuation accurate. In a windup situation one of the key objectives is to get property sold of quick to avoid dilapidation, squatters, vandalism, etc. This usually means selling at "fire sale" prices  and could easily be well below original market value. This is particularly so were building or conversion work is a work in progress. LTV is of course a major factor and particularly so where the original value was relatively low - say below £300k. In which case a LTV 70% only provides a theoretical gross margin of £90k and that has to pay the costs of sale, winding up and if you are lucky your capital and whatever you are owed by way of interest on your loan. So if the property sells at a 20% discount to the original valuation you had better start whistling for you money. If on the other hand the original valuation was three or four times the example above the residual margin will be much larger as many of the costs will be much smaller.

Personally I wont touch anything with a valuation below £500k and I want a better LTV that 70%. This I feel gives me a reasonable certainty of recovering my capital and a good chance of recovering some or all of my interest as well.

Come on AC tell me I am a prat and its not like that at all as AC have got it all watertight with bombproof paperwork.

Whilst you're right at a general level, in this case my concern is slightly different - namely by how much has the reasons given for refusing planning permission reduced the valuation obtained earlier in the year ? My reading (which is essentially worst case) is that planning may never be granted for the commercial development of the land, so the 18 acres of poor agricultural land are now essentially worthless once the cost of clearance of the previous use is factored in. But we don't know the split in the original valuation between the land and the house, to assess to impact of this.

From the Q&A:

Unfortunately our agreement with the introducer prohibits the release of information that identifies the borrower. However, valuation split is as follows:

House & 6 acres £295,000
Garden Centre & 12.4 acres £500,000
Combined Value (discounted) £750,000

and

However, we are satisfied that the valuation values asset in current state so we should expect to receive that amount if sale of the asset was required.

Pawnpusher with local knowledge was not convinced by the Garden Centre valuation