am
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Post by am on Oct 21, 2016 18:35:37 GMT
Headline LTV is an imperfect guide to risk. Please let us know your perfect guide to risk? There ain't one. That doesn't mean that looking at the LTV alone is the way to go.
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am
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Post by am on Oct 21, 2016 18:45:54 GMT
To be brutally honest if the club (whoever they might be) doesn't perform well, there is no market for the ground so in the absence of an alternative use you would be lucky to get anything at all, even if there were any buyer would require a large discount in order to compensate for clearing the site! So 90℅ discount is not enough.... The LTV for the full loan is ~50%, not 10%. I'd be skeptical that MT would be allowed to call in the security, without have performed their own contractual obligations, i.e. letting the full loan draw down, and anyway the full £2,500,000 should be raised and delivered to the borrower within a few weeks. That the LTV considering only the 1st tranche is only 10% is a red herring. (Considering that at least two people seem to have seized on this number, I wonder whether MT made a mistake in mentioning it.)
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stevio
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Post by stevio on Oct 21, 2016 18:48:02 GMT
Please let us know your perfect guide to risk? There ain't one. That doesn't mean that looking at the LTV alone is the way to go. Why do you assume anyone is? The LTV was especially pointed out as it is extremely low, which does help counteract the other riskier aspects of this loan, if looked at as a whole
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stevio
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Post by stevio on Oct 21, 2016 18:56:03 GMT
So 90℅ discount is not enough.... The LTV for the full loan is ~50%, not 10%. I'd be skeptical that MT would be allowed to call in the security, without have performed their own contractual obligations, i.e. letting the full loan draw down, and anyway the full £2,500,000 should be raised and delivered to the borrower within a few weeks. That the LTV considering only the 1st tranche is only 10% is a red herring. (Considering that at least two people seem to have seized on this number, I wonder whether MT made a mistake in mentioning it.) The full loan has not as yet been made and there is always a chance it might not be made, particularly if confidence has been lost and future tranches fail to fill. The current LTV is 10℅, it's not a red herring, it's fact. You can only base a decision made on current circumstances, rather than using a future LTV that might never come to fruition.
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stevio
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Post by stevio on Oct 21, 2016 18:58:40 GMT
The grounds could sell to a developer so there is plenty of resale opportunity if not to a football club It was mentioned earlier on the forum that the site is subject to a sporting covenant. While that covenant holds you might find it difficult to sell to a developer without a deep discount. Note that the LTV, when all tranches have been floated in a few weeks time, is around 50%. The whole point in the loan is to fund a new site and redeveloped the old
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ablender
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Post by ablender on Oct 21, 2016 18:59:54 GMT
So 90℅ discount is not enough.... The LTV for the full loan is ~50%, not 10%. I'd be skeptical that MT would be allowed to call in the security, without have performed their own contractual obligations, i.e. letting the full loan draw down, and anyway the full £2,500,000 should be raised and delivered to the borrower within a few weeks. That the LTV considering only the 1st tranche is only 10% is a red herring. (Considering that at least two people seem to have seized on this number, I wonder whether MT made a mistake in mentioning it.) I think that given that new information came to light, MT would be acting irresponsibly if they proceeded with raising and handing out more money. For me it is not clear cut that MT has to honour their obligations under the "previous" contract. Revisions might be in order. Yet I would expect that security for the money already passed exist. Any ideas about this?
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james
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Post by james on Oct 21, 2016 20:10:11 GMT
1) The football club needs a better finance department 2) The football club has been short of working capital, and has had difficulty scraping together the ready cash to pay (I presume) NI. In the latter case the MT loan is partially earmarked for working capital (it's also to provide seed capital for a proposed move to a new stadium and the release of value in the current stadium site). So that should solve the problem of paying HMRC in the short term, and we're back to the previous position where what was important were the feasibility of the exit strategy, the value of the security, and the sustainability of the business. ... I would have thought that the 1st tranche would have been used to avoid the latest petition, but perhaps it was just too late to get the payment through the systems in time. Given that this is the fourth time this year, only one of them with the bill paid before the legal action started, I doubt that it's a need for a better finance department but rather more like the club having a practice of paying bills as late as possible. It's also of interest that the previous three petitions are relevant to a decision to lend or not but weren't mentioned in the loan particulars. Makes me wonder also whether the firm has lots of recent CCJs or cases brought but then settled without a CCJ resulting and whether even without court cases the firm really does have an established practice of not paying other bills on time. Some business just isn't worth having and people who have an established practice of not paying on time would qualify, at least for me. An interesting question is how the first tranche was used, given that the order of events given was " will be used to take out existing finance (totalling £500,000), and then provide additional finance to the club", so it's of interest to wonder whether the money was really used to replace existing finance first. Given the owner I've no doubt that the firm will pay HMRC and the other bills at this point so I don't think that anyone who lent on the first tranche has any substantial short term need to be worried. It's the platform disclosure issues that I'm wondering about most.
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james
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Post by james on Oct 21, 2016 20:25:25 GMT
It was mentioned earlier on the forum that the site is subject to a sporting covenant. While that covenant holds you might find it difficult to sell to a developer without a deep discount. But was it mentioned in the loan particulars made available to market the loan to prospective lenders so that they would be aware of the potential effect on the value of the security? I don't see any mention of it and the security valuation is based on the club renting the property, not the club failure or lack of money and forced to move to cheaper premises cases. From information not provided in the loan description the local authority seems supportive of a change of use in the context of the club moving to a new local site but whether they would be similarly supportive without that new site is a different matter. I'd already rejected this loan on the basis of the quality of security, exit plan and club financials even without knowing specifically about the sporting use covenant. That was partly due to reading between the lines of the valuation and its assumptions.
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Post by thehatchet on Oct 21, 2016 20:37:10 GMT
It was mentioned earlier on the forum that the site is subject to a sporting covenant. While that covenant holds you might find it difficult to sell to a developer without a deep discount. Note that the LTV, when all tranches have been floated in a few weeks time, is around 50%. The whole point in the loan is to fund a new site and redeveloped the old Or pay HMRC?
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stevio
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Post by stevio on Oct 21, 2016 20:43:38 GMT
1) The football club needs a better finance department 2) The football club has been short of working capital, and has had difficulty scraping together the ready cash to pay (I presume) NI. In the latter case the MT loan is partially earmarked for working capital (it's also to provide seed capital for a proposed move to a new stadium and the release of value in the current stadium site). So that should solve the problem of paying HMRC in the short term, and we're back to the previous position where what was important were the feasibility of the exit strategy, the value of the security, and the sustainability of the business. ... I would have thought that the 1st tranche would have been used to avoid the latest petition, but perhaps it was just too late to get the payment through the systems in time. Given that this is the fourth time this year, only one of them with the bill paid before the legal action started, I doubt that it's a need for a better finance department but rather more like the club having a practice of paying bills as late as possible. It's also of interest that the previous three petitions are relevant to a decision to lend or not but weren't mentioned in the loan particulars. Makes me wonder also whether the firm has lots of recent CCJs or cases brought but then settled without a CCJ resulting and whether even without court cases the firm really does have an established practice of not paying other bills on time. Some business just isn't worth having and people who have an established practice of not paying on time would qualify, at least for me. An interesting question is how the first tranche was used, given that the order of events given was " will be used to take out existing finance (totalling £500,000), and then provide additional finance to the club", so it's of interest to wonder whether the money was really used to replace existing finance first. Given the owner I've no doubt that the firm will pay HMRC and the other bills at this point so I don't think that anyone who lent on the first tranche has any substantial short term need to be worried. It's the platform disclosure issues that I'm wondering about most. Other SD Company loans have paid on time without default The HMRC bills have all eventually been paid, although not when HMRC wanted It could be a cash flow issue, but lots of companies struggle with cash flow, but still do well
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james
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Post by james on Oct 21, 2016 21:40:28 GMT
OK, day 2 of investing with MT and already I'm scared  I understand historical default rates are vanishingly low which is one reason I've started moving some funds here from other P2P lenders... but having read back through some of the posts about this loan I'm wondering just how thorough the DD was? A football club losing more and more money each year, frequently failing to make HMRC payments (or at least submit returns) on time... I accept all loans carry some risk but this one seems well dodgy. Can anyone reassure me?  The individual behind the club has very substantial interests and I've little doubt that the club will actually pay up on its obligations, since his good name is of considerable value to him, far more value than the value of the club and its assets. I can reassure you in the short term that I've no doubt at all that the bills will be paid, so don't worry about immediately losing your money: I wouldn't. While I'm confident that the individual has lots of assets and values his good name, even such individuals can end up getting into financial trouble from time to time so that risk always has to be part of consideration and evaluation of security should that unlikely and unfortunate event come to pass. I'd already rejected this loan myself on the basis of the security and financial state of the company. So do follow one of the golden rules of investing: if you're not comfortable with the investment, don't make it: so sell if you haven't already sold and remain uncomfortable. In general I've been satisfied with the quality of MoneyThing's work on disclosure related to lending but this one and the winery one are two cases where I would say that MoneyThing has not met its obligation to treat lenders fairly and has not met the standard of disclosure that I expect, and want the FCA to require, of P2P lending firms. That is not my normal opinion of MoneyThing, which has been that the quality of such things has been high. While writing that, do always be aware that you and the platforms you use have different interests. The platforms are not your best friend, they are a business with their own interests and sometimes that will cause them to act in ways that you are not comfortable with. Part of your assessment must be whether you're comfortable enough with the particular platforms you use. I've generally rated MoneyThing highly on this scale which is why i'm suggesting that you do not change plans relating to use of MoneyThing.
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james
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Post by james on Oct 21, 2016 21:47:34 GMT
Other SD Company loans have paid on time without default ... The HMRC bills have all eventually been paid, although not when HMRC wanted ... It could be a cash flow issue, but lots of companies struggle with cash flow, but still do well It might also be very tight financial management to delay as long as possible according to one theory of how to do that. Given that it's led to legal costs having had to be paid at least twice it's been backfiring a bit, it seems, if that was the reason. Still, if it is tightness to the point of routinely paying bills late, I wouldn't want to lend.
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am
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Post by am on Oct 21, 2016 22:22:32 GMT
It was mentioned earlier on the forum that the site is subject to a sporting covenant. While that covenant holds you might find it difficult to sell to a developer without a deep discount. But was it mentioned in the loan particulars made available to market the loan to prospective lenders so that they would be aware of the potential effect on the value of the security? I don't see any mention of it and the security valuation is based on the club renting the property, not the club failure or lack of money and forced to move to cheaper premises cases. From information not provided in the loan description the local authority seems supportive of a change of use in the context of the club moving to a new local site but whether they would be similarly supportive without that new site is a different matter. I'd already rejected this loan on the basis of the quality of security, exit plan and club financials even without knowing specifically about the sporting use covenant. That was partly due to reading between the lines of the valuation and its assumptions. I've gone looking for confirmation of the earlier statement on the forum that there's a sporting covenant on the ground. All I've found is statements on various fan discussion sites. While supporting evidence it's hardly definitive. Does anyone know how to find a definitive statement? (If the covenant is an urban legend we can hardly criticise MT for not telling us about it, but if it does exist it's a material fact that I think should have been disclosed.)
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james
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Post by james on Oct 22, 2016 2:14:14 GMT
I've gone looking for confirmation of the earlier statement on the forum that there's a sporting covenant on the ground. All I've found is statements on various fan discussion sites. While supporting evidence it's hardly definitive. Does anyone know how to find a definitive statement? (If the covenant is an urban legend we can hardly criticise MT for not telling us about it, but if it does exist it's a material fact that I think should have been disclosed.) I don't know of such, I just assumed that the comment made here was accurate. Would be nice to have a clear statement either way though. Of course there's also stuff around like the claim in a post on a fan site that there was a new circa £20k (number deliberately modified to inhibit searching) CCJ granted against the borrower in the middle of this week. Still, a public records check does show that there is now a charge in favour of MoneyThing in place as one of the seven outstanding charges and that's good to see. Would be nice to know which of the satisfied charges was removed when its borrowing was repaid by the first tranche. Assuming that actually happened, and that there was an associated charge, neither of which I know. At least if the charge was there and is gone that would show that the first tranche money was used for repaying debt, at least to the value covered by any removed charges. Of course given the declared use of the money a desire to have more working capital should hardly be surprising, since finance for the club was one of the declared purposes of the borrowing. It's entirely possible - and currently seems proper to me given the loan description - that the borrower was counting on the second and subsequent tranches to settle outstanding bills including the HMRC one. If so we might end up seeing MoneyThing resuming the second tranche with that as part of its description and the reason why it's resumed.
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james
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Post by james on Oct 22, 2016 2:38:54 GMT
One very good thing is that MT did enable the secondary market on the first tranche in association with the news in spite of discussion of the original plan to be not to do that until all five were done with, even though that seems not to have been mentioned until after people had finished bidding on the first tranche. An excellent move by MoneyThing to allow anyone who wants to exit the loan to try to do so! And given the speed with which sales of this have been bought I suspect that there would be a large appetite for a second tranche should that come to pass. Particularly from anyone who agrees that club funding was part of the declared purpose so it would not be fair to be unduly critical of the club having troubles if the money didn't arrive as soon as hoped for. |
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