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No doubt the administrators wanted to do whatever they could to be reassuring and prevent them getting barraged with calls and emails from worried bondholders. That might have been a grave error.
I agree. I thought that the loans made to publicly quoted companies such as Independent Oil & Gas and Atlantic Petroleum and could be verified as being genuinely in existence were the best hope for investors to get some money back despite being made via a third party.
From a comment earlier it appears that this may not be the case. IOG has market cap of £16 million but owes £30 million (with agreed option to £38 million.) If that was the best hope it doesn't give much comfort for the loans made to non trading companies.
https://damn-lies-and-statistics.blogspot.com/2019/02/how-much-money-back-from-lcf-bonds.htmlRemember the saying: if it looks too good to be true it almost certainly is.0 -
Did the investors ('bondholders') ie members of the public giving money to LCF know who the end recipients of the money (ie the 12 companies / ''borrowers'') were, when they handed their money over?0
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David_Evans wrote: »Did the investors ('bondholders') ie members of the public giving money to LCF know who the end recipients of the money (ie the 12 companies / ''borrowers'') were, when they handed their money over?
No, they did not0 -
Botheredin wrote: »No, they did not
Is this common practice?
I don't own any specific bond funds, but my equity funds show all the companies they hold.
It seems strange that people would buy (what seems similar to) a bond fund from LCF, without asking what companies were being lent to?
Would anyone buy an IT or OIEC without looking at the underlying holdings?0 -
Another interesting thing I would ask, is why would a (seemingly legitimate, LSE AIM listed) company like IOG, get involved with borrowing from LCF?
Why wouldn't IOG just issue its own bonds, or borrow from a bank?0 -
David_Evans wrote: »Another interesting thing I would ask, is why would a (seemingly legitimate, LSE AIM listed) company like IOG, get involved with borrowing from LCF?
Why wouldn't IOG just issue its own bonds, or borrow from a bank?
IOG didn't borrow from LCF. It borrowed from a company (LOG) that borrowed from LCF. LCF has no direct lending relationship with IOG which may complicate matters for the administrators.
As IOG appears to be insolvent the terms of a bank loan may have been too high for them. The loan from LOG (via LCF) looks like it was convertible so can be turned into equity in IOG at the price of 19p. Probably not a great idea when the share price is 12p at the moment.
A convertible also doesn't normally require the payment of interest which raises the question of where the payments to investors come from?Remember the saying: if it looks too good to be true it almost certainly is.0 -
Yes, in general, when you look into companies who borrow at these rates, they are often loss-making, loaded up with debt and looking to borrow more to expand their business in the hope of turning things around. Otherwise they'd be able to borrow at reasonable rates from mainstream lenders.I agree. I thought that the loans made to publicly quoted companies such as Independent Oil & Gas and Atlantic Petroleum and could be verified as being genuinely in existence were the best hope for investors to get some money back despite being made via a third party.
From a comment earlier it appears that this may not be the case. IOG has market cap of £16 million but owes £30 million (with agreed option to £38 million.) If that was the best hope it doesn't give much comfort for the loans made to non trading companies.
https://damn-lies-and-statistics.blogspot.com/2019/02/how-much-money-back-from-lcf-bonds.html0 -
Transparency in the related P2P industry is highly varied. Some offer self-select investments with clear visibility of the borrower, trading business, assets etc. Others are completely 'black-box' and investors need to trust that the loan writing company is performing the necessary due diligence on their behalf and choosing suitably credit-worthy borrowers.David_Evans wrote: »Is this common practice?
I don't own any specific bond funds, but my equity funds show all the companies they hold.
It seems strange that people would buy (what seems similar to) a bond fund from LCF, without asking what companies were being lent to?
Would anyone buy an IT or OIEC without looking at the underlying holdings?
Some investors did try to ascertain who the borrowers were in this case, but LCF was not forthcoming with details. It took us a while to identify some of the borrowers, there was clearly an effort to obfuscate - and for good reason it seems.0 -
Well it looks to me as if the buck stops with the LCF directors, in person. No hiding behind any limited company paperwork.
If I was an investor, I'd be wanting to have a face-to-face chat with them and see what they've got to say.0 -
Yes, in general, when you look into companies who borrow at these rates, they are often loss-making, loaded up with debt and looking to borrow more to expand their business in the hope of turning things around. Otherwise they'd be able to borrow at reasonable rates from mainstream lenders.
Exactly, this is my reflex with all mini-bonds, even the ones which are genuine but high risk companies.
I feel somewhat similarly about equity crowdfunding... but I can more understand having an undiversified punt on a single small equity, because the upside can be very big if you're lucky.
An undiversified investment in a single mini-bond has the same downside (substantial risk of losing everything) but very limited upside (at best you get the coupon of 6-10%ish for taking all that risk).0
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