Peer-to-peer lending sites: MSE guide discussion

masonic

AdrianC wrote: »

It's very simple... The administrators of Lendy Ltd owe a duty to ALL creditors.

We, the investors, are not the only creditors.

In fact, we aren't creditors of Lendy Ltd for the most part - we are the creditors of the borrowers. Those who are creditors of Lendy Ltd are owed the monies which they're due under the waterfall. The administrators would be breaking the law, as well as not doing their job, if they were to fail to properly consider them.

Old terms ("Model 1") loans are different, obvs - we are creditors of Lendy Ltd there, so every pound that gets to Lendy Ltd from the waterfall of New Terms ("Model 2") loans may well be some more pennies for those lenders. I seem to recall there being lenders who preferred the old terms loans and swore blind nothing good would come out of the new ones...

I think my recent comments in this thread demonstrate I fully understand and agree with that. Further to that, and something I've mentioned before is that this isn't a Special Administration, investors are not given the same status and rights as creditors, as they would have been if it were. I would hope I'd have made my position clear in the preceding posts that I don't believe the administrators are doing anything contrary to their responsibilities, nor do I believe they are misunderstanding the legal situation, but the court will have the final say on this.

When I stated that "Experience has taught me you never know what people's real motives are or whether their interests align with yours", a specific experience I had in mind was when an individual tried to incite others to go against the appointment of a new administrator by the FCA, citing how much more expensive it would be and the impact it would have on all of the good work done by the incumbent administrator. That individual was connected with a representative of the P2P firm and the incumbent administrator was soon after the subject of a fraud investigation and his company put in administration. I merely make the observation that, in this case also, lenders are being encouraged towards a course of action that conceivably might not be in their best interests.

You may very well think that not all creditors deserved to be creditors, due to "shenanigans" relating to certain aspects of the business's operations. But... they are.

If that comment is directed at me, I don't think that at all. I sympathise with lenders' situation. I held no money with Lendy when it entered into administration, but I have fallen victim to two other P2P insolvencies. But I don't think any party to this should be treated in a manner that is contrary to law.

AdrianC

masonic wrote: »

When I stated that "Experience has taught me you never know what people's real motives are or whether their interests align with yours", a specific experience I had in mind was when an individual tried to incite others to go against the appointment of a new administrator by the FCA, citing how much more expensive it would be and the impact it would have on all of the good work done by the incumbent administrator. That individual was connected with a representative of the P2P firm and the incumbent administrator was soon after the subject of a fraud investigation and his company put in administration.

Perhaps that was just collateral damage...?

If that comment is directed at me, I don't think that at all.

I was considering some of the "movements" relating to the property assets of LyLtd, and some of the apparent senior staff emoluments.

bigadaj

I think Adrian's comments about 'undeserving' creditors isn't aimed at any lender, or indeed other legitimate creditors but the directors of Lendy and ssas. They stand to benefit from the administration and many woud say undeserving is far too mild a term for those individuals and might think regulators or enforcement authorities should be taking a closer interest.

masonic

bigadaj wrote: »

I think Adrian's comments about 'undeserving' creditors isn't aimed at any lender, or indeed other legitimate creditors but the directors of Lendy and ssas. They stand to benefit from the administration and many woud say undeserving is far too mild a term for those individuals and might think regulators or enforcement authorities should be taking a closer interest.

Blimey, that's a novel idea! If only there was someone up to the job

I'd have hoped the administrators would have considered whether the directors had acted in accordance with their obligations under the Companies Act, such as acting with reasonable care, skill and diligence, avoiding conflicts of interest, and acting in a way that would promote the long term success of the company.

jamesd

AdrianC wrote: »

The administrators of Lendy Ltd owe a duty to ALL creditors.

We, the investors, are not the only creditors.

Investors are not just creditors, secured or otherwise.

They are secured investors (at least newer contract ones) and that's a different category with broadly higher precedence even than ordinary secured creditors. It's a matter about which the administrators of Collateral sought advice and it improves the position.

If this distinction isn't being dealt with then I very strongly recommend reading BDO's documents about the collateral administration.

Those under the oldest terms are particularly likely to need the precedence that might get them almost equally ranked with the other investors.

Please at least read the BDO documents before considering disagreeing.

jamesd

masonic wrote: »

I'd have hoped the administrators would have considered whether the directors had acted in accordance with their obligations under the Companies Act

By law they are required to do that and if they believe it's applicable based on what they learn, make a report to the Home Secretary (?).

Malthusian

I believe it's actually the Business Secretary who has the job of filing those reports in the cylindrical filing cabinet under the desk.

masonic

jamesd wrote: »

Investors are not just creditors, secured or otherwise.

They are secured investors (at least newer contract ones) and that's a different category with broadly higher precedence even than ordinary secured creditors. It's a matter about which the administrators of Collateral sought advice and it improves the position.

If this distinction isn't being dealt with then I very strongly recommend reading BDO's documents about the collateral administration.

Those under the oldest terms are particularly likely to need the precedence that might get them almost equally ranked with the other investors.

Please at least read the BDO documents before considering disagreeing.

My recollection of BDO's position was that investors were secured investors (not creditors) with trust claims over assets held in security by way of their loan contracts with the borrowers. To the extent that disposal of the trust assets would leave a shortfall, they would also be unsecured creditors of Collateral. It was considered that there would be a significant shortfall, and as such lenders were included in the creditor base.

The above does not appear to be materially different than RSM's position in relation to Lendy. What does appear to be different is that RSM is including principal, accrued interest to investors, interest to Lendy, default interest to Lendy, and an exit fee as part of the trust claim, whereas BDO only includes principal. The affect of the difference is to give Lendy a significant claim over the proceeds of disposal of all trust assets. Though Lendy's administration has overtaken Collateral's in terms of progress towards distribution, and BDO has not yet made a proposal in relation to how funds will be apportioned during distribution.

Model 1 lending (those under the oldest terms) was not P2P lending. Those were unsecured loans to SavingStream, where SavingStream re-lent the money in secured loans to other borrowers.

masonic

jamesd wrote: »

By law they are required to do that and if they believe it's applicable based on what they learn, make a report to the Home Secretary (?).

Yes, and they can also use that information to pursue a personal liability claim against the directors if it were in the interest of creditors. Although I have observed that it can cause a director to become terribly ill and unable to attend court while simultaneously disposing of their assets at a rapid pace.

jamesd

masonic wrote: »

My recollection of BDO's position was that investors were secured investors (not creditors) with trust claims over assets held in security by way of their loan contracts with the borrowers. ... What does appear to be different is that RSM is including ... interest to Lendy, default interest to Lendy, and an exit fee as part of the trust claim

I fail to see how interest to Lendy or default interest due to Lendy can be part of the trust claim. Lendy isn't part of the investor group and I see no reason for payments to Lendy to take precedence over trust payments.

Which is a view those in the trust investor group might wish to take legal advice on.