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Post by brightspark on Aug 5, 2018 10:44:28 GMT
As part of its even handedness Lendy should at the time of writing contracts evaluate the ability of borrowers to repay on time. This is in the interest of lenders and borrowers. Whilst recognising that this is not an exact science the general consensus is that Lendy has not been paying enough attention to this issue. I don't actually think there is much difference between our points of view - simply a matter of emphasis.
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Post by Whitbourne on Aug 5, 2018 13:52:43 GMT
Lendy is required to balance the requirements of borrowers and lenders. Adopting your proposal would disadvantage borrowers. I do not agree. LY needs to be more selective on who they lend money to and be tougher on enforcing loan T&Cs. Good borrowers would still come, and the borrower’s that are put off are the ones we don’t want. What requirements of borrowers are you talking about? The requirement to offer to repay less than they borrowed? Or the requirement to get interest free loans for a few years without repercussions? Good borrowers do not need to pay Lendy 18% plus, they can get much better terms from a bank. By definition, if someone is willing to pay Lendy's rates they have either a high-risk proposition or an urgent need for a short-term bridging loan.
I am not arguing with the proposition that Lendy should be more selective, I agree with charliebrown. I think the outcome would be a smaller business serving clients with a short-term need such as the caravan park sites that were acquired near Poole, where the borrower was going to trade for a year, demonstrate profitability and then refinance. Or the quarry in Shoreham where the borrower had a time-limited option that they wanted to exercise. That is a genuine bridging loan, which is the right use for Lendy finance. A typical development project simply does not have the profitability to be able to bear an interest rate of 18% on the building costs over 12-18 months, the margins simply aren't there. Those loans are not in the interest either of the developers (who risk losing all their equity) or us as investors (who are unlikely to get our capital back).
However for Lendy's owners their interest is to grow the business even if it makes low-quality loans. Lendy wins in any case - it charges arrangement fees at the outset and then penalties for late payment, which are deducted before investors get any repayment. So the basic problem IMHO is that the interests of borrowers, investors and Lendy are not properly aligned.
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11025
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Post by 11025 on Aug 5, 2018 14:29:55 GMT
I do not agree. LY needs to be more selective on who they lend money to and be tougher on enforcing loan T&Cs. Good borrowers would still come, and the borrower’s that are put off are the ones we don’t want. What requirements of borrowers are you talking about? The requirement to offer to repay less than they borrowed? Or the requirement to get interest free loans for a few years without repercussions? Good borrowers do not need to pay Lendy 18% plus, they can get much better terms from a bank. By definition, if someone is willing to pay Lendy's rates they have either a high-risk proposition or an urgent need for a short-term bridging loan.
I am not arguing with the proposition that Lendy should be more selective, I agree with charliebrown . I think the outcome would be a smaller business serving clients with a short-term need such as the caravan park sites that were acquired near Poole, where the borrower was going to trade for a year, demonstrate profitability and then refinance. Or the quarry in Shoreham where the borrower had a time-limited option that they wanted to exercise. That is a genuine bridging loan, which is the right use for Lendy finance. A typical development project simply does not have the profitability to be able to bear an interest rate of 18% on the building costs over 12-18 months, the margins simply aren't there. Those loans are not in the interest either of the developers (who risk losing all their equity) or us as investors (who are unlikely to get our capital back).
However for Lendy's owners their interest is to grow the business even if it makes low-quality loans. Lendy wins in any case - it charges arrangement fees at the outset and then penalties for late payment, which are deducted before investors get any repayment. So the basic problem IMHO is that the interests of borrowers, investors and Lendy are not properly aligned.
What you are saying is correct but this smaller more selective business is what Savingstream was like - so this is growth and some less desirable loans are part and parcel of this ... However I don't see why we should tolerate 70% LTVs and wonky valuations , oversights on planning and inadequate due diligence and somewhat questionable actions taken on defaults , as far as I am concerned Lendy is now a tricky platform and needs to be treated with the utmost care.
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Post by GSV3MIaC on Aug 5, 2018 14:57:50 GMT
Those loans are not in the interest either of the developers (who risk losing all their equity) or us as investors (who are unlikely to get our capital back).
The problem is that, in many cases, the developers don't have any equity to lose (in the worst cases they have negative equity which we have subsidised). We lent them £2m against a plot of land they bought for £1m, and a promise to spend the other £1m developing it to where they can sell it for £3m. Equity .. what equity?!
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empirica
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Post by empirica on Aug 5, 2018 17:05:48 GMT
The problem is that, in many cases, the developers don't have any equity to lose (in the worst cases they have negative equity which we have subsidised). We lent them £2m against a plot of land they bought for £1m, and a promise to spend the other £1m developing it to where they can sell it for £3m. Equity .. what equity?! Put like that _ which may be an overly simplistic approach, but is not necessarily any the worse for it _ investors are effectively being offered 12% return on a 200% LTV.
Makes the 'Your capital is at risk' warning a deal more sobering.
Quite how Lendy are expecting 'Sophisticated Investors' to accept as little as 6% in these types of loan is beyond me.
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Jeepers
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Post by Jeepers on Aug 10, 2018 9:49:58 GMT
There must be some progress to report since the vote concluded 2 weeks ago Lendy Support ?
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Post by charliebrown on Aug 10, 2018 11:22:01 GMT
There must be some progress to report since the vote concluded 2 weeks ago Lendy Support ? Still pushing and working tirelessly. Give them a few more years.
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Post by p2plender on Aug 10, 2018 13:28:23 GMT
Pathetic isn't it.
Lendy is a complete and utter shambles.
Founding partner leaving, Brookes wearing an ill fitting blazer at Cowes, Paul missing in action from here for months.
I just hope they can right the good ship in time for the xmas bash. Deep breaths, don't look at the terrifying list of defaults nor the upcoming DFL tranches. Ding dong merrily on high.
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Jeepers
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Post by Jeepers on Aug 29, 2018 21:18:57 GMT
A month has passed since the vote.
Must be some meaningful update to report by now.
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Monetus
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Post by Monetus on Aug 31, 2018 15:12:01 GMT
Looks like we're heading towards the build out option...
"Whilst we have engaged with the borrower to obtain his best and final offer, these negotiations have not resulted in a suitable settlement proposal which we believe would be acceptable to our investors. In those circumstances, unless the borrower provides suitable settlement proposals by Monday 3 September 2018, it is Lendy’s intention to appoint administrators over the borrower company with a view to thereafter building out the site and disposing of the same."
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elliotn
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Post by elliotn on Aug 31, 2018 15:18:23 GMT
Looks like we're heading towards the build out option... "Whilst we have engaged with the borrower to obtain his best and final offer, these negotiations have not resulted in a suitable settlement proposal which we believe would be acceptable to our investors. In those circumstances, unless the borrower provides suitable settlement proposals by Monday 3 September 2018, it is Lendy’s intention to appoint administrators over the borrower company with a view to thereafter building out the site and disposing of the same."Could have had my £ out by now being used productively, who’d let a little thing like landslide democracy get in the way
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Monetus
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Post by Monetus on Aug 31, 2018 18:17:20 GMT
Could have had my £ out by now being used productively, who’d let a little thing like landslide democracy get in the way Indeed. It takes a brave (or some would say foolish) outfit to overrule a vote and then plough ahead with an option that is likely to "result in significantly less capital returned to investors" Tactics perhaps?
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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 Aug 31, 2018 19:26:02 GMT
Based on experience of other defaults ... build out will be the best option. Sell to another developer & you get distressed value minus cost because your over a barrel. The administrator would manage the build out using a respected contractor
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invester
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Post by invester on Sept 1, 2018 0:07:43 GMT
Therein lies the trouble. Has Lendy ever commenced a build out? In various cases they have said they would look into the possibility of it, but deep down I think they aren't in a position to do it.
There is a fair amount of work to do here from what I can see. Given no capital restrictions in an ideal world they could simply build the thing out and take the supposed profit on the table. There is no obligation to share that with borrowers, we signed up for a fixed interest (plus bonus if applicable) deal.
But this isn't an ideal world. It seems unlikely they could fill a request for the cash because of lender sentiment. And even if they have the money themselves, the risk of things going bad (cost overruns, declining sale values, irresponsible valuation) would be fairly stupid to take with their own dwindling cash balances.
Either it will be sold as is to a developer or the original borrower will come back in at the last minute. Or perhaps we might get luckier and a third party will come in.
Too many holes in this - I thought that income was already being generated by the flats being rented to the council, no mention of this at all.
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SteveT
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Post by SteveT on Sept 1, 2018 6:08:43 GMT
And who's going to fund this build out? Presumably finance to complete would be raised against the development (on a 1st charge basis, relegating the existing LY debt to 2nd charge). Likely from a commercial lender rather than via the LY platform, given the need for certainty of funds.
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