London Capital and Finance

Sledger

Bail In
Re your page 5 Part 1 post quote

"A year later on 1/12/2017 a new domain name http://www.lcaf.co.uk was acquired by LC&F. The new lcaf.co.uk website was not linked to in the londoncapitalandfinance.co.uk website. In Google the whole name lcaf.co.uk, including the suffix, is required in the search. The site has three sections: business loans (£500,000 minimum), introducers, and investing; with online application forms but still no evidential info re business loans. No loan statistics, no borrower reviews, no lending team details or contact. However, other sme loan providers will not provide such evidence either, some citing data protection laws. Incorrectly, as data protection laws only apply to living individuals not companies. Any smes out there have a LC&F secured business loan? Recent LC&F accounts can be downloaded from the lcaf.co.uk site."

Do you have a copy of the Loan brochure as cant find mine which I downloaded

jimjames

The info from administrators also states:

No loans to borrowers are expected to be repaid imminently

As there were bondholders expecting repayment of their capital since LCF was frozen does that mean that new investor's money was being used to repay capital to old bondholders?

In a number of cases, the Borrowers (and sub-Borrowers) have indicated that they will be
unable to generate the very high levels of financial return needed to settle the claims of
the Bondholders without engaging in debt for equity swaps

LCF claimed no borrowers have defaulted on their loans. Was this statement missing the word "yet" from the end? It's also curious that the wording says borrowers unable to generate levels of return needed. I would expect it to say that they are unable to pay their interest/capital as per loan agreement. Why would the borrower be expected to pay the level of return that bondholders need if that isn't what is in their loan agreement?

masonic

jimjames wrote: »

Reading the info again I've not seen anything from the administrators that states that Surge were employed as an underwriter. That suggestion was from a report of a conversation between the owner of a Facebook group and the administrators. I wonder if the person reporting it didn't really understand financial terms.

The letter this week says an agent was used to raise money and process applications. Exactly the same is done by Blackmore bond

Yes, the administrators have only referred to 'agents' in their official correspondence with bondholders and the term 'underwriter' has only been used by the facebook group owner when describing his private conversation with the administrators. However, I think it is unlikely that the facebook group owner came up with this term.

I suppose it is reasonable to assume the clarification promised in the letter they were 'currently drafting' has come in the most recent communication received. Whether or not Surge was putting up money to complete the loans prior to sale or not, the end result is the same - only three quarters of bondholder money was ever advanced to borrowers.

londoninvestor

jimjames wrote: »

If you look at the reviews they say nothing about the risks, they are apparently people who have no understanding they have invested their savings into a high risk unregulated product.

Indeed - the reviews generally testify to what a smooth and hassle-free procedure it was to hand over cash to Mr Careless and co, but the efficiency of that process isn't really what was in doubt!

masonic

jimjames wrote: »

The info from administrators also states:

No loans to borrowers are expected to be repaid imminently

As there were bondholders expecting repayment of their capital since LCF was frozen does that mean that new investor's money was being used to repay capital to old bondholders?

Let's refer to the flow chart provided in the information memorandum:


It seems clear that loan principal and interest is paid into a segregated account, from which bondholders are repaid principal and interest. If we believe the flow chart, new investor money should not find its way into the Interest account except via loans to borrowers. While things were rosy I'd imagine most bondholders were rolling over their maturing bonds into new ones. The few who needed repaying could be dealt with using a float of funds in the Interest account. As long as the loan book kept growing, there would be sufficient funds there to bridge the gap between a small number of bondholders cashing in and a loan actually repaying.

In a number of cases, the Borrowers (and sub-Borrowers) have indicated that they will be
unable to generate the very high levels of financial return needed to settle the claims of
the Bondholders without engaging in debt for equity swaps

LCF claimed no borrowers have defaulted on their loans. Was this statement missing the word "yet" from the end? It's also curious that the wording says borrowers unable to generate levels of return needed. I would expect it to say that they are unable to pay their interest/capital as per loan agreement. Why would the borrower be expected to pay the level of return that bondholders need if that isn't what is in their loan agreement?

They were probably expecting to be able to take out new loans to service the old ones. What they are likely struggling with is the final bullet repayment given that they only ever received 75% of the capital. They are likely to be repaying monthly interest of 12-20%, which is enough to satisfy the interest claims of bondholders - perhaps using the money they were lent.

It is important to remember that bondholders have no recourse to borrowers for anything more than is specified in their loan contracts, so if borrowers' loan contracts do not require them to pay the level of return bondholders would need, then bondholders are out of luck!

jimjames

londoninvestor wrote: »

Indeed - the reviews generally testify to what a smooth and hassle-free procedure it was to hand over cash to Mr Careless and co, but the efficiency of that process isn't really what was in doubt!

Absolutely. The thing I find funny is when people comment about scams (**) saying "but they seemed so honest", completely missing the point that if they weren't then money would not have been handed over.
** Not suggesting that LCF was a scam but that reviews of a scam don't tell the full story although LCF was definitely misleading investors as confirmed by FCA.

Aretnap

londoninvestor wrote: »

Indeed - the reviews generally testify to what a smooth and hassle-free procedure it was to hand over cash to Mr Careless and co, but the efficiency of that process isn't really what was in doubt!

And also that you can see your balance online and that the first interest payment was made on time, as if these were great selling points rather than the absolute minimum you would expect from any investment.

A bit like a review of a used car which says 'I'm really happy with this car, it has four wheels and an engine. One day I might even try taking it for a drive.'

jimjames

Aretnap wrote: »

And also that you can see your balance online and that the first interest payment was made on time, as if these were great selling points rather than the absolute minimum you would expect from any investment.

Strangely enough the comments about seeing balance and being paid interest aren't ones that appear anywhere on my bank's review page. I wonder why?

The balance online was a masterstroke for LCF, it gave investors the impression that their money was secure and safe and fixed in value whereas with other investments such as S&S funds the value fluctuates daily. The fact that the value shown was completely meaningless didn't even come into it.

Jelli

I'm just wondering, how would someone know that 8% is a big, unrealistic percentage? Is it possible to find out every savings/investment offer in the UK, then make a judgement on what's a suspect percentage? Would 3% indicate something unrealistic? Sorry if there's an obvious answer but I'm tired.

eskbanker

Jelli wrote: »

I'm just wondering, how would someone know that 8% is a big, unrealistic percentage? Is it possible to find out every savings/investment offer in the UK, then make a judgement on what's a suspect percentage? Would 3% indicate something unrealistic? Sorry if there's an obvious answer but I'm tired.

The MSE guide to capital-protected savings accounts should be a reasonable starting point.

While there are undoubtedly ways of achieving a 3-5% return on relatively insignificant amounts of money, via current accounts and/or regular savers, it quickly becomes obvious that the going rate for cash deposits is in circa 1.5% territory, or perhaps 2+% if prepared to fix it for a year or more.

This has been the situation for several years now, so anyone reviewing an 8% offering and evaluating it as being in the same ball park really should stop and think about how any company could offer that sort of return without risk.

Or to put it more succinctly, if it looks too good to be true....