Fluid ISA Bond 1 Limited

Rob_ronson

Same here Pauline… I got my last interest in July 2021 then nothing after… problem was, in the interims I subsequently forgot I was expecting one in October, then only found out from a dodgy looking letter “from NPI” that they’d gone into liquidation… I’d had an email back in August but it had found its way into my junk folder!

masonic

jimjames said:

pauline_88 said:

Everything was going very well till October 21 when they missed my interest deadline. I agree the pandemic had an affect also Brexit maybe? 

Unfortunately I'd just see those as excuses. Fluid was supposedly investing the money you lent to them for property development and the market has been booming during the pandemic so I can't see why that would impact their ability to pay interest.

Judging by some of the P2P lenders to property developers, there has been some forbearance needed by the developers. While construction workers were only affected by one brief portion of the first lockdown, there have been knock-on consequences. sales/lettings have also been impacted, in particular for student blocks where there's been a decrease in demand from both international and domestic students. Construction/refurbishment of leisure/hospitality premises have also been impacted. This was pretty much restricted to 2020 though, with most borrowers resuming interest payments in early 2021. The timing is very suspicious. Either this is a red herring, or Fluid have been making interest payments out of capital to hide the problem from bondholders.

pauline_88

Yes I was told it was property development in Scotland. 

Tracy66D

masonic said:

jimjames said:

pauline_88 said:

Everything was going very well till October 21 when they missed my interest deadline. I agree the pandemic had an affect also Brexit maybe? 

Unfortunately I'd just see those as excuses. Fluid was supposedly investing the money you lent to them for property development and the market has been booming during the pandemic so I can't see why that would impact their ability to pay interest.

Judging by some of the P2P lenders to property developers, there has been some forbearance needed by the developers. While construction workers were only affected by one brief portion of the first lockdown, there have been knock-on consequences. sales/lettings have also been impacted, in particular for student blocks where there's been a decrease in demand from both international and domestic students. Construction/refurbishment of leisure/hospitality premises have also been impacted. This was pretty much restricted to 2020 though, with most borrowers resuming interest payments in early 2021. The timing is very suspicious. Either this is a red herring, or Fluid have been making interest payments out of capital to hide the problem from bondholders.

If Fluid have been making interest payments out of the capital to hide the problem from 2020 why would they let it go on for so long? 
The company was only incorporated in 2018 seems a very short time considering the vast experience and assurances they promote in their brochure

For example:

"Ways my capital is protected
Protective measures are put in place to help safeguard investors capital.
The lending company undertakes thorough due diligence on its borrowers and must meet a strict 70% LTV criterion to provide peace of mind to investors. Fluid assets are held in a trust to protect investors in case either the borrowers, lending company or Fluid fails to meet its commitments"
" In the rare instance of insolvency, Fluid Lending would be able to make payments via accumulated profits, loan security asset sales loan capital repayments and company liquidation.

 Partner Showcase:
Pomegranate Consulting an award winning chartered accountancy committed to to being proactive problem solvers
Pomegranate Commercial finance Brokers that can call upon 20 years of experience and act as a conduit for sourcing bridging finance deals for the fluid trust lending arm
Northern Provident Investments Authorised and regulated by the FCA and is HMRC Authorised IFISA Manager. Primarily they focus on providing Innovative Finance ISA (IFISA) management services and solutions
BONDS BACKED BY LEGAL EXPERTISE
Harold Sharp Accountants and Auditors Appointed as independent auditors
Clarke Wilmott Solicitors having acted for buyers sellers and investors, their breath of experience helps maximise the value of transactions whilst minimising associated risk.
Capital growth Limited act on behalf as distributors for bonds and assist with queries before investments are made
More Group Capital Services - Independent Security Trustee acts as a Security Trustee on a variety of transactions both in the public sphere and on niche private deals involving alternative finance providers

Ansar Mahmood
over fifteen years of experience working with a variety of entrepreneurial businesses
His dedication and attention to detail is second to none. In a space of just five years he founded Pomegranate Consultancy and grew the start up from a two man band into a multi office business with hundreds of clients
Ansar brings his valuable financial knowledge to many developers across the city as well as his wide contact base
Vice president of TiE UK North  
Will Jackson
Finance Director for several property deleveopments
Wealth of experience in working with professional services ie surveyors architects 
As fellow developer on the same Great Manchester developments as Ansar

The lack of communication is so frustrating I have tried contacting Fluid and CC'd Leonard Curtis in a hope that they might respond but as yet nothing.

I have also emailed the FCA to see they had any additional information on the situation but they only suggested looking on the FSCS website for any updates as follows:

• 07 Feb, 2022

  Our investigation into NPI is ongoing. Since our last update, we've been liaising with the joint liquidators to get the relevant records from NPI to help with our investigation. We hope to complete our review of those records over the next month or so.

  We will then determine whether NPI was engaged in any regulated activity regarding the investments it was involved with. If it was, we'll determine whether FSCS protects any of those investments.

  If that is the case, we will also need to determine whether NPI owes a civil liability to any customers that would enable them to sue the firm in court.

Tracy66D

masonic said:

pauline_88 said:

I don’t recall being told my money was at risk and if anything being told by money was safe under the FCA Compensation scheme but paperwork says otherwise and Fluid confirming by email to me that it was not covered under FCA Comp Scheme.

NPI should have made you sign a declaration similar to the following before you invested: https://www.handbook.fca.org.uk/handbook/COBS/4/7.html#DES620

It should have included the statement: "I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on non-readily realisable securities."

If no such investor declaration was provided to you, then that would constitute a breach of FCA regulations by NPI and might give you an avenue of redress (via the Financial Ombudsman Service). It is unclear whether FSCS compensation could be paid for such a breach when the investments are not eligible for such compensation. The risks should also have been mentioned in the same paperwork you received that stated the investments were not eligible for FSCS compensation.

pauline_88 said:

I would be interested to know if any investors have been paid out this year upon maturity of their bond?  

It seems all investors in this issue of the bonds are in the same boat. Someone mentioned that a previous issue paid out in full. The problems at Fluid started in 2000, probably due to the pandemic and borrowers defaulting on the money that was loaned to them by the lending arm of Fluid.

I don't recall signing any declaration from NPI and cannot find any email or paperwork showing I did
How would you find out?

It also states in the Fluid Bond information Brochure

"All Bond investors are assessed and verified for due diligence purposes before they can be accepted"

Not once was I was told I would need to be assessed before I was accepted to invest in the Fluid Bond but then why would they!! I feel like I have been legally scammed and like other comments I have read on this forum if I get something back it will be bonus but so far not looking good :-(

masonic

Tracy66D said:

masonic said:

jimjames said:

pauline_88 said:

Everything was going very well till October 21 when they missed my interest deadline. I agree the pandemic had an affect also Brexit maybe? 

Unfortunately I'd just see those as excuses. Fluid was supposedly investing the money you lent to them for property development and the market has been booming during the pandemic so I can't see why that would impact their ability to pay interest.

Judging by some of the P2P lenders to property developers, there has been some forbearance needed by the developers. While construction workers were only affected by one brief portion of the first lockdown, there have been knock-on consequences. sales/lettings have also been impacted, in particular for student blocks where there's been a decrease in demand from both international and domestic students. Construction/refurbishment of leisure/hospitality premises have also been impacted. This was pretty much restricted to 2020 though, with most borrowers resuming interest payments in early 2021. The timing is very suspicious. Either this is a red herring, or Fluid have been making interest payments out of capital to hide the problem from bondholders.

If Fluid have been making interest payments out of the capital to hide the problem from 2020 why would they let it go on for so long?

In the case of a company like Fluid, where the obligation to pay bondholders interest is an entirely separate agreement to the obligation their borrowers have to pay them interest on their loans, there is no requirement for the former interest payments to come from the latter interest received, unless there is something specified in the agreement you have with Fluid stating this. The answer to the question why would they do it, or do it for so long, is therefore most likely to be because they thought their business model was still viable and that they could recover from the temporary outlay. You mentioned this went on until October 2021, so spanned a little over 18 months from when other lenders started receiving reduced or suspended interest payments from their borrowers. There isn't sufficient information to say one way or the other whether any interest was paid from capital during this period, but what is documented in the accounts of Fluid is that £1.4m of loans were taken off their books without capital being received by the companies (this represents over 50% of the money lent in 2019). That will be, at least in part, due to irrecoverable bad debt. It is surprising to me that the directors could possibly believe that they could recover from such a setback, but two out of three of them did subsequently resign.

Tracy66D said:

The company was only incorporated in 2018 seems a very short time considering the vast experience and assurances they promote in their brochure

It's not so unusual for experienced individuals to set up a new venture seeking to exploit an opportunity they've come across in their previous roles. However, I think it would be fair to say that industry experience doesn't fully equip someone to manage all aspects of a business in that industry. Often prior roles are quite specialised, relying on existing infrastructure in an established business that may be taken for granted. Taking the companies and individuals involved in the venture first, and then looping back for the capital protection:

Tracy66D said:

 Partner Showcase:
Pomegranate Consulting an award winning chartered accountancy committed to to being proactive problem solvers
Pomegranate Commercial finance Brokers that can call upon 20 years of experience and act as a conduit for sourcing bridging finance deals for the fluid trust lending arm
Northern Provident Investments Authorised and regulated by the FCA and is HMRC Authorised IFISA Manager. Primarily they focus on providing Innovative Finance ISA (IFISA) management services and solutions
BONDS BACKED BY LEGAL EXPERTISE
Harold Sharp Accountants and Auditors Appointed as independent auditors
Clarke Wilmott Solicitors having acted for buyers sellers and investors, their breath of experience helps maximise the value of transactions whilst minimising associated risk.
Capital growth Limited act on behalf as distributors for bonds and assist with queries before investments are made
More Group Capital Services - Independent Security Trustee acts as a Security Trustee on a variety of transactions both in the public sphere and on niche private deals involving alternative finance providers

The Pomegranate companies run by Ansar Mahmood. The two companies have 12 and 4 employees respectively, and little in the way of assets. Northern Provident has of course gone bust, but it was the most significant company involved in the venture. The legal companies are of course not directly involved in the business model, but have presumably drafted the legal agreements and given advice. There is no indication that the contracts are in any way defective. The fact that they have asked Leonard Curtis to step in and help them rescue the business suggests that nothing fraudulent has taken place, but that the business is nevertheless at the brink of failure.

Tracy66D said:

"Ways my capital is protected
Protective measures are put in place to help safeguard investors capital.
The lending company undertakes thorough due diligence on its borrowers and must meet a strict 70% LTV criterion to provide peace of mind to investors. Fluid assets are held in a trust to protect investors in case either the borrowers, lending company or Fluid fails to meet its commitments"
" In the rare instance of insolvency, Fluid Lending would be able to make payments via accumulated profits, loan security asset sales loan capital repayments and company liquidation.

There is no reason to believe these safeguards weren't in place, but it would be easy for someone to misinterpret how effective they might be at preventing a loss of capital. For example, the 70% LTV would have been calculated based on the open market value of the property, or the gross development value of a development project. Completed properties that need to be sold at auction to recover capital where a borrower has defaulted will generally be sold off in a fire sale for far less than market value, as low as 30% in some cases, which is far below the 70% LTV margin of safety. If the loan is second ranking, then another lender might have priority to the recovered funds, leaving nothing for the second charge holder, even though the total lending was 70% LTV.

Things may be even worse for a property development loan, as the project may fail before the development is completed, so what is being sold is in effect a building site with a part-completed building where the developer has been unable to get enough interest from buyers or financiers. If the site has been abandoned for some time, significant remedial work may be needed, or the project may need to be scrapped and a buyer would just be investing in the land for some other purpose. If the borrower is a company, then the legal costs of bringing in a receiver or liquidator would need to be paid for. It is not unprecedented in such a scenario for there to be a 100% loss of capital.

The trust arrangement is reassuring, but is totally reliant on the assets held in trust to attain the value attributed to them, which clearly they may not. When the assets are loan contracts with property developers, secured on a building site that is intended to turn into a valuable building a couple of years in the future, many things can go wrong.

These are absolute basics in this sort of finance, so apologies if you already understand all of this.

The quoted text mentions "accumulated profits", but the accounts of Fluid Lending are a matter of public record and in 2020 it lost £1.6m of its assets, leaving it with net liabilities of £2.17m.

Tracy66D said:

I have also emailed the FCA to see they had any additional information on the situation but they only suggested looking on the FSCS website for any updates as follows:

• 07 Feb, 2022

  Our investigation into NPI is ongoing. Since our last update, we've been liaising with the joint liquidators to get the relevant records from NPI to help with our investigation. We hope to complete our review of those records over the next month or so.

  We will then determine whether NPI was engaged in any regulated activity regarding the investments it was involved with. If it was, we'll determine whether FSCS protects any of those investments.

  If that is the case, we will also need to determine whether NPI owes a civil liability to any customers that would enable them to sue the firm in court.

There is nothing of use here. If NPI could be implicated in giving regulated financial advice to bondholders, then the advice could be challenged as unsuitable, and FSCS compensation could flow from that. If any bondholder believes they received personal advice from NPI to invest in Fluid's bonds, then they should not wait for this FCA determination, they should raise a formal complaint against NPI and when the joint liquidators confirm the complaint cannot be considered, they should refer it to the Financial Ombudsman Service so that they have the determination ready to take to the FSCS should it be possible.

Tracy66D said:

I don't recall signing any declaration from NPI and cannot find any email or paperwork showing I did
How would you find out?

It also states in the Fluid Bond information Brochure

"All Bond investors are assessed and verified for due diligence purposes before they can be accepted"

Not once was I was told I would need to be assessed before I was accepted to invest in the Fluid Bond but then why would they!! I feel like I have been legally scammed and like other comments I have read on this forum if I get something back it will be bonus but so far not looking good :-(

It could have been a paper form, completed by telephone during the sales process, or even on the website. It is unclear who was responsible for that part, but it would normally be an FCA authorised firm, so NPI is the most likely candidate. The FCA ought to be checking this, but it would be good to understand from others whether/how this was done.

jimjames

masonic said:

Tracy66D said:

"Ways my capital is protected
Protective measures are put in place to help safeguard investors capital.
The lending company undertakes thorough due diligence on its borrowers and must meet a strict 70% LTV criterion to provide peace of mind to investors. Fluid assets are held in a trust to protect investors in case either the borrowers, lending company or Fluid fails to meet its commitments"
" In the rare instance of insolvency, Fluid Lending would be able to make payments via accumulated profits, loan security asset sales loan capital repayments and company liquidation.

There is no reason to believe these safeguards weren't in place, but it would be easy for someone to misinterpret how effective they might be at preventing a loss of capital. 

The trust arrangement is reassuring, but is totally reliant on the assets held in trust to attain the value attributed to them, which clearly they may not. When the assets are loan contracts with property developers, secured on a building site that is intended to turn into a valuable building a couple of years in the future, many things can go wrong.

It's worth remembering that LCF had a trust system setup in the same way and unfortunately that made no difference to the outcome of the assets being available. They also stated that loans were made to a fraction of the value of the assets taken as security (25%? I think). That was also of no use when the assets were found to be worth nothing like the value claimed in the accounts. It's similar with Blackmore Bond where the development sites were also mortgaged which ranked higher than bondholder loans so wiped out the value of the sites.

Hopefully it's none of those scenarios but it shows how the claims made can be misleading in giving an aurora of security around mini bond investments. Unless you do your own due diligence then you are entirely reliant on the statements made by the company that may or may not be true or complete.

Tracy66D

Not sure what this means but a Mr Dominic Alexander Olivero has been appointed as  director today (22nd February 2022) for Fluid ISA Bond 1 Limited, Fluid ISA Bond 2 Limited and Fluid Lending Limited, he was also appointed Director to Fluid Trust PLC on 17th January 2022.
He is also Operations Manager for Pomegranate Financial services Limited, Pomegranate Mortgages Limited, Pomegranate Residential Mortgages Limited and Director for Turnecote Limited.

Tracy66D

Not sure my last comment means anything now as I have received an email from Leonard Curtis this morning after contacting them last week as follows:

"Thank you for your email

Please be advised that Leonard Curtis has been instructed to assist in placing Fluid ISA Bond 1 Limited into Creditors Voluntary Liquidation, and we will be writing out to all customers in due course with further details" 

At least the not knowing is over, but looks highly unlikely that Bond Holders will get any back :-(

masonic

Tracy66D said:

At least the not knowing is over, but looks highly unlikely that Bond Holders will get any back :-(

The last published accounts show a significant shortfall, but it may be possible to return some of the money. Much will depend on the status of the remaining loans, the cost of winding down the loan book, and whether there are preferential creditors ranking ahead of bondholders.

On the added director, public limited companies require a minimum of two directors, so I'd guess they needed to find someone quickly when the others resigned. Makes sense Ansar Mahmood would use one of his business partners.