DFL012 H********* Quay, Liverpool DEFAULT (Partial Recovery

That strikes me as an odd comment, given Lendy's decision to reject the borrower's additional financing proposal and instead appoint an Administrator was taken to protect our interests (rather than let our security be diluted). Out of interest, who do you reckon is ahead of us in whatever "queue" you're thinking of?

Anyone lending money via P2P should expect loans to go off the rails; not all of them, but a sizeable proportion. Statistically speaking, it's inevitable. The reason borrowers pay us double-digit interest on performing loans is that we accept the high risk they'll stop performing at some stage. If there wasn't a high risk of that, the borrowers could raise finance much more cheaply elsewhere. However, security is taken over assets to ensure that downside risk is reduced (NOT eliminated). Sadly, there are far too many people who've chucked money they can't afford to lose into P2P without understanding or accepting this.

I've literally dozens of non-performing loans across the various platforms I use (plus hundreds that are performing). On a handful, I face a total write-off but I'm usually at fault for ever investing in them. On quite a few, I expect some level of haircut. On many, I expect full recovery in time, at least of capital and sometimes also of outstanding interest. Overall, my P2P net return over 4 years (after provisions for expected losses) sits at around 9%, rather better than the 7% I hoped for.

For what it's worth, based on what we know so far, I'd currently put the range of probabilities on this one something like:

- Full recovery (capital, interest and bonus)    40%         (my expected outcome)
- Recovery of all capital and some interest      20%
- Recovery of all capital but no interest           20%
- 0-10% haircut                                            10%
- 11-25% haircut                                            6%
- 26-50% haircut                                            3%
- >50% haircut                                               1%

I feel this looks fairly solid if the GDV figures are accurate and the works get back underway through some means relatively quickly.

Can anyone explain why this isn't going to 70% of GDV?

And whether there was any mention (beyond the sale of units) that the loan at 60% wasn't sufficient to complete the development from the outset?

It looks a long way from completion to me.

It’s ok to keep smugly reminding people that they need to understand “your capital is a risk” but I believe by any standards Lendy’s risk/reward is an absolute disaster. 

I don't think the DFL model or equivalent is often appropriate for P2P - I think it encourages risky or marginal projects that otherwise would not be funded. 

Coupled with delays and cost overruns (which are generally the fault of the developer, not the platform), seemingly infinite tranches and fantasyland valuations, then it surprises me when people are surprised they might lose some money.

As to risk / reward - how do you adjust that? If you increase the interest rate further to increase the reward, the project is more likely to fail not less, meaning in my mind you are more likely to lose capital. 

There’s another thread asking what’s Lendy’s real rate of interest. I feel that once the dust settles you’ll have needed the luck of the gods to have made any interest at all, and more than likely most people will have lost a significant amount of capital. Lendy’s model is broken for investors, it’s not a risk it’s financial suicide.