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Post by bracknellboy on Apr 15, 2014 21:30:30 GMT
so now we know: don't expect anything further other than coppers in terms of recovery from the administration. However, anybody else find the comment somewhat confusing ? Partial copy to give context:
"..... 6 monthly report from the Administrators ..advises that currently they expect there to be insufficient realisations to enable a distribution to unsecured creditors other than by virtue of the prescribed part. The prescribed part is the portion of the proceeds from sale of assets covered by a floating charge that are exclusively set aside for a distribution to unsecured creditors. This is estimated at £xxxxx and will be subject to costs in distributing these funds.... "
So, on first reading, this suggests all outstanding creditors will be sharing a pot of xxx minus costs, since otherwise why say this when the loan was, last time I looked, secured. So in the context of the FC loan, the only way I can make sense of this comment is in one of two ways:
"they expect there to be insufficient realisations to enable a further distribution to unsecured creditors other than by virtue of the prescribed part. The prescribed part is the portion of the proceeds from sale of assets covered by a floating charge that are exclusively set aside for a distribution to unsecured creditors. This is also shared with secured creditors in proportion to the outstanding balance owed to secured creditors.
Or:
"they expect there to be insufficient realisations to enable a further distribution to unsecured creditors other than by virtue of the prescribed part. The prescribed part is the portion of the proceeds from sale of assets covered by a floating charge that are exclusively set aside for a distribution to unsecured creditors. As FC lenders are classified as secured, they will not be eligible for any distribution from these funds. "
I strongly suspect that the second of these is the case, which makes the FC posting somewhat meaningless as stands. Given I know not a jot of what I speak, presumably there is some 3rd interpretation ? Step forward the administration/liquidation specialist.
Note however: absolutely no statement as to any chasing of the cross guarantee .....
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Post by bracknellboy on Apr 15, 2014 21:55:30 GMT
I suppose there is a 3rd interpretation, namely "we've only read and commented on the the bit about unsecured creditors 'cos we've forgotten that this was a secured loan". Still, that now means i'm looking for the 4th interpretation.
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jimbo
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Post by jimbo on Apr 15, 2014 23:41:32 GMT
Surely secured creditors rank ahead of unsecured creditors in the queue...
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blender
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Post by blender on Apr 16, 2014 7:00:21 GMT
... Note however: absolutely no statement as to any chasing of the cross guarantee ..... I was looking at this one before FC posted, and noticed that the guarantor company or parent company was in administration. I think the borrower company is long gone and this report is about the guarantor - though FC have never told us that, perhaps not keen to tell us that the company guarantees are as worthless as the director guarantees. Looking at the assets and charges of the parent company, it is all freehold land about 90% covered by mortgages. I do not understand their post (I don't think they want us to, just to let us know not to expect much). I may be wrong about the above, in which case please correct it - but let us not identify the borrower or the guarantor companies. Three repayments and 200k of FC loan down the drain.
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Post by bracknellboy on Apr 16, 2014 7:31:43 GMT
Surely secured creditors rank ahead of unsecured creditors in the queue... Jimbo: yes in general, however the key in this context is: "The prescribed part is the portion of the proceeds from sale of assets covered by a floating charge that are exclusively set aside for a distribution to unsecured creditors." This vaguely rings bells for me from a time when I did some nosing into how administrations/liquidations are handled.
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Post by aloanatlast on Apr 16, 2014 12:59:39 GMT
Apparently when assets covered by a floating charge are realised, the preferential unsecured creditors (wages and taxes) get first dibs and only what's left is available to the charge-holder. I guess they're saying that there won't be anything left.
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jimbo
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Post by jimbo on Apr 16, 2014 13:33:54 GMT
I see. Wages are fair enough, and when it comes to taxes, it would be most strange for HMRC to not demand their pound of flesh.
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Post by aloanatlast on Apr 16, 2014 17:07:54 GMT
Oops, they've changed it. The taxman gave up his priority and joined the unsecured creditors.
The quid pro quo is that part of the liquidation proceeds are now set aside for the unsecured creditors, before the floating-charge holder (the bank usually) just takes the lot. This is the prescribed part.
So it's
(1) fixed charge holders, up to the value of their security, then they join (5)
(2) wages
(3) prescribed part for unsecured creditors, including taxman
(4) rest to floating-charge holder, up to the value of his debt
(5) anything left over to unsecured creditors, including taxman.
Charge-holders don't get anything out of the prescribed part if their debts aren't covered by their security.
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jm72
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Post by jm72 on Apr 29, 2014 11:53:21 GMT
I asked FC what was going on and got the following response:
"It is important to note that the comment is detailing what the Administrator's report has said and you are correct in saying that we are secured creditors due to the All Asset Security we hold.
We are 2nd floating charge creditors, which means that unfortunately we will most likely not receive any further recoveries after the first charge holders.
Therefore, we have taken the decision to release our security and become unsecured creditors. This means that can receive a distribution as a virtue of the prescribed part (estimated at £88,000 and will be subject to costs in distributing these funds).
Please be assured that we will always work as hard as possible to maximise the recoveries for lenders, and in this case this is the decision we have taken.
I understand that the comment is a little unclear and I have passed this feedback on to Funding Circle Trustees for their consideration."
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Post by aloanatlast on Apr 29, 2014 12:38:12 GMT
So second floating charge = negative security - security so worthless that we're actually better off without it.
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blender
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Post by blender on Apr 29, 2014 12:47:53 GMT
Must be like that quasi-security mentioned in connection with 4907. Quasi-security = looks like security, but isn't really.
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oldgrumpy
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Post by oldgrumpy on Apr 29, 2014 13:13:47 GMT
Maybe the regulators will have something to say about FC and "quasi security"..... quasi-misleadingnessism?
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Post by valerieb on Apr 29, 2014 15:12:24 GMT
Pity I've already filled in FC's latest survey or I could have commented on their quasi-security.
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Post by bracknellboy on Apr 29, 2014 17:35:54 GMT
Forgive me if I'm missing something, but FC have STILL not clarified whether this is in relation to the original company or the parent/cross guarantor. They failed to clarify that point when I emailed them several months ago about their earlier obtuse comment.
We are I think all correctly surmising that the original borrower is now an empty shell with no realisable assets for creditors after the original transaction and this is all applying to the cross gurantor, but its pretty poor that they have failed to make this stuff clear.
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blender
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Post by blender on Apr 29, 2014 19:40:47 GMT
Forgive me if I'm missing something, but FC have STILL not clarified whether this is in relation to the original company or the parent/cross guarantor. They failed to clarify that point when I emailed them several months ago about their earlier obtuse comment. We are I think all correctly surmising that the original borrower is now an empty shell with no realisable assets for creditors after the original transaction and this is all applying to the cross gurantor, but its pretty poor that they have failed to make this stuff clear. They just post comments to update the file. I don't think they worry about reviewing and checking the whole update story for completeness and accuracy. It is the guarantor parent company which is the subject of the notes. There is nothing else out there for us. That was a prime example of quasi-security - a disappearing trick. Many months ago I queried their note on a defaulted loan which said that the borrower (a company) had applied for an IVA. They just changed it to guarantor, without any concern about previously posting nonsense.
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