m2btj
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Post by m2btj on Aug 9, 2017 12:18:57 GMT
A loan of £47,368.00 at midday today more or less saw this loan put to bed. Didn't even get the chance to spend my £1!
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am
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Post by am on Aug 9, 2017 12:42:55 GMT
ah, I thought it was - I'm not going mad then (yet), the discussion was as if it was a term loan as it concentrated on the principles, that's what's confused me. As I've said elsewhere the best security is the security you don't need to exercise*. For this loan that means asking whether the exit plan via development finance is viable. Which means asking whether the business plan is financially sound. *As this wasn't universally understood the first time, this is meant to be a pithy way of saying that avoiding defaults is at least as important as recovering your money in the event of a default.
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Post by nebaconezzer on Aug 9, 2017 12:57:58 GMT
As it's a bridging loan they're actually underwritten against the quality of the security and the ease of liquidation should the loan default rather than the principles that's why they're typically a non-status loan. So the key questions are the quality of the asset, the LTV and the VR.
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copacetic
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Post by copacetic on Aug 9, 2017 13:16:50 GMT
As it's a bridging loan they're actually underwritten against the quality of the security and the ease of liquidation should the loan default rather than the principles that's why they're typically a non-status loan. So the key questions are the quality of the asset, the LTV and the VR. There is a saying however, 'If you lie down with dogs, you get up with fleas.'
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Post by nebaconezzer on Aug 9, 2017 13:33:34 GMT
If agree, and should be a consideration on a term loan but this is a bridging loan, which has a wholly different set of fundamentals
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Post by nebaconezzer on Aug 9, 2017 13:44:15 GMT
Commercial assets liquidate easily below 65% LTV so at 43% LTV MT are well inside that threshold. Any inaccuracies in the valuation in the event of a default would also be covered by the valuers PI which should be c.£5m for a commercial valuer at least so either way the security basket on this one is well covered. Taking the principles out of the equation the security basket is solid, even if they don't perform.
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Post by nebaconezzer on Aug 9, 2017 13:45:05 GMT
Any idea what's next in the pipeline?
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oik
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Post by oik on Aug 9, 2017 14:17:43 GMT
Any idea what's next in the pipeline? A mountain-climbing school in Norwich apparently.
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GeorgeT
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Post by GeorgeT on Aug 9, 2017 14:23:41 GMT
As it's a bridging loan they're actually underwritten against the quality of the security and the ease of liquidation should the loan default rather than the principles that's why they're typically a non-status loan. So the key questions are the quality of the asset, the LTV and the VR. So your argument is that it doesn't matter if it defaults. Well, defaults are often messy, long drawn out processes during which investors' funds are locked in for a unknown period with an uncertain outcome. Given the wide choice of available loans across lots of platforms, I'd rather avoid getting involved with borrowers with dubious pasts and a list of questionable projects behind them, in the first place.
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am
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Post by am on Aug 9, 2017 14:34:48 GMT
Commercial assets liquidate easily below 65% LTV so at 43% LTV MT are well inside that threshold. Any inaccuracies in the valuation in the event of a default would also be covered by the valuers PI which should be c.£5m for a commercial valuer at least so either way the security basket on this one is well covered. Taking the principles out of the equation the security basket is solid, even if they don't perform. People tell me that making a claim on a valuer's insurance isn't particularly easy. There have been defaults on other platforms were the recoveries were well below the valuations, but as far as I can tell there's no prospect of claiming against the valuers. For me there's also an ethical dimension. I don't wish to engage in unethical/predatory lending. But there is a question as to where the line was drawn. One answer is to draw the line at the interest rate, and not engage in, say, pawnbroking or payday lending. But there is a counter argument that excluding some people from loans is also unethical. I've recently come up with an alternative criterion. The loan transaction should be beneficial to both parties - that is the weighted mean return over all scenarios to both parties should be positive. (And on a finer degree the relative returns should reflect the relative risks, reflected as variance in returns, each party is taking.) From this I conclude that I shouldn't lend just on a basis of the security covering the value of the loan.
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Post by mrclondon on Aug 9, 2017 14:37:11 GMT
Commercial assets liquidate easily below 65% LTV so at 43% LTV MT are well inside that threshold. Any inaccuracies in the valuation in the event of a default would also be covered by the valuers PI which should be c.£5m for a commercial valuer at least so either way the security basket on this one is well covered. Taking the principles out of the equation the security basket is solid, even if they don't perform. Sorry, I disagree. There could only be a claim against the valuer's professonal indemity insurance if it could be shown the residual valuation for this (and only this) exact scheme of student rooms etc was incorrect. (E.g. if it was later proved to be an impossibility under current Scottish law to create leaseholds for the student rooms). If the borrower is unable to secure development finance, and this loan defaulted, the site would go back on the market as 1.nn acres of land with a listed building on it that no-one has come up with a viable business plan for in over ten years since the care home closed. The valuer has not valued on this basis, and so their professonal indemity insurance is irrelevant. Personally my own opinion of the land value in a firesale situation is that it is probably less than the loan value. (My best guess is £600k OMV for a cleared site with residential permissions, less 30% for quick sale & the problem of the listed building, so c. £420k )
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stub8535
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personal opinions only. Not qualified to advise on investment products.
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Post by stub8535 on Aug 9, 2017 14:40:16 GMT
Any idea what's next in the pipeline? A mountain-climbing school in Norwich apparently. As viable as a ski village in s suffolk quarry to a known bankrupt I suppose.
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Post by mrclondon on Aug 9, 2017 14:50:24 GMT
What's next ? Well in 5 to 6 months, the first development finance tranche for a certain language school in Paisley. MT say they have first refusual for the development finance, in practice, MT may have to provide development finance to prevent a default on this loan.
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am
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Post by am on Aug 9, 2017 14:55:41 GMT
I believe that it would depend on the precise instructions given to the valuer, but I doubt that in this case there's any prospect of a successful claim. I still think it's a bad VR, but it's a bad VR because it doesn't have any tyres to kick, not because there's anything obviously wrong with the valuation. (My assessment is similar to yours - this is a security with a relatively high risk of falling well short of the valuation on a forced sale.)
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am
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Post by am on Aug 9, 2017 15:04:28 GMT
What's next ? Well in 5 to 6 months, the first development finance tranche for a certain language school in Paisley. MT say they have first refusual for the development finance, in practice, MT may have to provide development finance to prevent a default on this loan. Since the former hotel in Burnley is on the market for £700,000, it's conceivable that the proceeds from the sale of this could be used to repay this loan. Update: cooling_dude points out that the ownership of the hotel is an inference too far.
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