11% over 3 years from Ablrate P2P
jamesd
Posts: 26,103 Forumite
The relatively new peer to peer lending platform Ablrate currently has an 11% loan offer over 3 years, all capital to be repaid at the end, none during the loan term. This is secured on an ATR 42-500 commuter aircraft that can carry from 40-52 passengers, worth around £3.5 million. The leasing firm Phoenix wants to replace their current finance deal because it would be much cheaper. The aircraft is currently leased by them to Columbian government owned airline Satena at a lease rate that is more than double the interest cost of the loan. Interest is set in Pounds, not the Dollars normally used in aircraft leasing, so there's no interest exchange rate risk. While the loan term is fixed, there is a secondary market that allows buying and selling loans, of course no guarantee that you'd find a buyer if you wanted to sell.
If you like the rate, don't get carried away. You can expect another four or so similar loans in the next month and fifty plus over the next year, quite likely more. So do something like deciding how much you want to invest over the year then putting no more than 2% in each loan, for diversification. If something goes wrong with a loan it's much easier to be relaxed about it if it's 2% of the money rather than much more. Unless you have a high risk tolerance don't consider putting more than 25% of your money in P2P and ideally diversify so that no more than 5-10% is at one P2P platform.
Since this is peer to peer there is no FSCS protection, though the FOS does cover P2P.
I'm mentioning this because I think that Ablrate has one of the better P2P propositions. There's more discussion over at the P2P Independent Forum and you can read the full loan proposal document.
If you like the rate, don't get carried away. You can expect another four or so similar loans in the next month and fifty plus over the next year, quite likely more. So do something like deciding how much you want to invest over the year then putting no more than 2% in each loan, for diversification. If something goes wrong with a loan it's much easier to be relaxed about it if it's 2% of the money rather than much more. Unless you have a high risk tolerance don't consider putting more than 25% of your money in P2P and ideally diversify so that no more than 5-10% is at one P2P platform.
Since this is peer to peer there is no FSCS protection, though the FOS does cover P2P.
I'm mentioning this because I think that Ablrate has one of the better P2P propositions. There's more discussion over at the P2P Independent Forum and you can read the full loan proposal document.
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I've looked at Ablrate in passing and they do have some interesting propositions. The aviation sector can be an interesting one although the way to best make money out of it depends on the direction of the wider economy at the time.
Across this forum there are always lots of exotic-sounding opportunities in far off parts of the world or in niche sectors where it is hard to research the provenance of the offeror, the risks are not always apparent and the average 'punter' would do well to avoid. Often promoted by cold callers and the like.
The attraction of getting involved in peer to peer is that you are able to have relatively small nibbles at a business plan that you have vetted to some extent. Of course, the quality of the due diligence that you can practically achieve when you are only investing those small amounts of money is limited - if you don't invest a huge amount and are only expecting to get a few hundred pounds of extra interest over the lower risk options, it's not efficient to carry out a lot of research because it all eats into the returns. So, while 11% is nice, it clearly won't be for everyone and your caveats about diversification, FSCS are all sensible.
When looking at business plans you have to look at a lot of angles. For example, you mention "Interest is set in Pounds, not the Dollars normally used in aircraft leasing, so there's no interest exchange rate risk".
This is true in the sense that you don't have to worry that the 11%, if you receive it, will be something other than 11%, so long as they can afford to fully pay it to you. Of course, they are holding a dollar-valued asset and financing their GBP loan repayments with dollar income streams, hence interest rates may adversely affect their ability to repay you, so you may still receive something other than (i.e. lower than) 11%.
The underlying income stream you're investing in will fluctuate in pounds and therefore although you have a cap on the upside (you never get more than 11%) you don't have one on the downside (things could go spectacularly wrong and you receive less than 11%). So, you don't need to worry about currency, because the headline says that they take the FX hit, but if there's too much of an FX hit, then you do have to worry about it because it will cause a default.
This is just an example of the most basic thoughts that should go through your head when you look to evaluate a funding proposal on one of these sites.
Of course, they are willing to pay 11% which is great, but anyone having a go at this should appreciate that they are only willing to pay so much because it is risky and they couldn't easily borrow the money for 10% - even in an environment where rates for some types of secured lending are at base rate plus a few hundred basis points.0 -
This is secured on an ATR 42-500 commuter aircraft that can carry from 40-52 passengers, worth around £3.5 million. The aircraft is currently leased by them to Columbian government owned airline at a lease rate that is more than double the interest cost of the loan.
So the Columbian government is leasing a 52 seater aircraft at 22% interest with some other muppets financing the deal ?.
I mean - what could possibly go wrong. :rotfl:
Is it like only Fools and Horses Jolly Boys Outing coach trip but instead of Margate we have the favellas and drug barons.?
Del Boy - Come on Uncle Albert its a trip out innit - just a low flyin over the poppy fields a stop for a Mohito and a spot of lunch and and a steep fly out avoiding the anti aircraft missiles and home in time for tea.
Albert Sea you tomorro Rodney.0 -
Can someone with greater posting skills than me please put up a picture of a very very long bargepole.0
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You occasionally see corporate bond issues coming out with a coupon in this ballpark. Am I right in thinking this is a considerably riskier proposition than one of those?0
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A fair range of things could go wrong, but do note that Ablrate are not allowed to reply here so if you have questions you should ask either in the P2P Independent Forum or in the loan Q&A page at Ablrate, though you won't be able to see that without setting up an account there first. If you ask you'll find that they are helpful. I happened to have a question earlier today, phoned them and I think I ended up speaking with the CEO. No reason you can't give them a call if you have questions about this loan or their business.So the Columbian government is leasing a 52 seater aircraft at 22% interest with some other muppets financing the deal ?. I mean - what could possibly go wrong. :rotfl:
I'm not planning to help in that way but if it's not for you, definitely don't invest in it. There's no shortage of similar rate deals in the loan pipeline so if you don't like this one you could try one of those. Maybe you'd have liked the Morrow Brothers bottling plant loan more, perhaps being reassured because the Pennine Regeneration Fund was also financing that one? Or if investing isn't for you, you can always stick to savings accounts and the near certainty that they offer.Can someone with greater posting skills than me please put up a picture of a very very long bargepole.
I don't think so, partly because I think that the security is much better, but of course you have to decide for yourself and regardless you should diversify. With around two and a half million Pounds going to be lent on this loan, some undoubtedly by some investment firms, this isn't the student borrows then changes address end of the P2P market. More like the middling to big business with teams of lawyers to do the chasing end.You occasionally see corporate bond issues coming out with a coupon in this ballpark. Am I right in thinking this is a considerably riskier proposition than one of those?
You might want to take a look at what Reuters has to say in Fancy investing in a plane? Crowdfunding site offers the chance.
This sort of thing isn't for those who want the near zero loss guarantee of savings accounts but for investors it's reasonable enough, though maybe not this particular loan if the idea of the current leasing airline or the location of the borrower worries you. Perhaps also worth considering that I started doing P2P about seven years ago and decided that I thought that the firm and deals were interesting enough to mention as well as interesting enough for me to invest some of my own money, at no higher than the 2% exposure that I mentioned in the initial post.0 -
It's just an anecdote but I invested a chunk in Odyssey airlines on ThinCats 10/2013 at 16%pa. All OK. They paid out last month after getting £100m from an investment bank.
Odyssey was just one loan (highest rate in fact) on ThinCats, is part of my p2p exposure, which is part of my fixed income, which is part of my portfolio, which is part of my wealth.0 -
TheTracker wrote: »It's just an anecdote but I invested a chunk in Odyssey airlines on ThinCats 10/2013 at 16%pa. All OK. They paid out last month after getting £100m from an investment bank.
I assume you were in loan 1? Loans 2 and 3 still going strong, and probably going to repay long before anyone has to worry whether Oddy will ever get a plane in the skies.
Ablrate P2P are fine as a small part of a diversified portfolio, but if you fancy a piece of the platform and not just their loans, why not buy a bit of Assetz Capital (currently available via the Seedrs web site)0 -
Does that mean that once they got their £100m IB money they paid you out the full principal and the 16% interest you'd hoped to be paid for the full term of the loan? Or did they pay you off quicker to refinance themselves with the IB money, meaning you got your cash back off risk but then didn't get to take much of the lucrative rate you'd hoped for?TheTracker wrote: »It's just an anecdote but I invested a chunk in Odyssey airlines on ThinCats 10/2013 at 16%pa. All OK. They paid out last month after getting £100m from an investment bank.
One of the downsides of this sort of arrangement (p2p generally) is where early repayment is allowed - you have to prepare yourself for the possibility that you'll never see your money again, which means you want to get a big reward, but then actually after you've placed your stake they just say after a while that they don't want it, take the IB money and give you yours back with some relatively small amount of profit to say thanks for the short term cash.
You could give up quite a bit of your time to assess the risk up front, pondering whether to invest, thinking it's worth it because you'll get paid out (say) £2000 interest, but then if they can repay early you might only get £200 interest which woefully underpays you for your up front time and effort and risk taken on, even though your money is back in your hand nice and quickly and has not technically given you a 'loss'.
With the particular deal linked by Jamesd it says you'll get interest paid monthly and then all the capital after the 3 years. There is no early repayment of principal option mentioned, so hopefully none of that sort of risk. But many of these commercial loans offered on p2p sites can allow the borrower early repayment without giving the lender the protection of a break fee or early repayment fee, because they figure the naive retail lenders won't look out for that sort of thing.0 -
bowlhead99 wrote: »Does that mean that once they got their £100m IB money they paid you out the full principal and the 16% interest you'd hoped to be paid for the full term of the loan? Or did they pay you off quicker to refinance themselves with the IB money, meaning you got your cash back off risk but then didn't get to take much of the lucrative rate you'd hoped for?
I'd be annoyed if my mortgage lender had such a practice! Of course repayment ceases the attraction of interest, and it does so if a regular payment is made or the complete balance repaid. I don't think any p2p gives early repayment fees. I generally count on early repayment/refinancing and reduce headline rates by 10% for planning purposes to account for the out of market time. It's also a reason I look for shorter loans - if the company is a going concern then they'll eventually be able to convince a bank to lend to them. The headline rate also doesn't apply to the full sum, as the principal drops each month, except on interest only loans. P2p requires some month by month pruning. One needs to account for this hassle factor when diving in.I assume you were in loan 1? Loans 2 and 3 still going strong, and probably going to repay long before anyone has to worry whether Oddy will ever get a plane in the skies.
Ablrate P2P are fine as a small part of a diversified portfolio, but if you fancy a piece of the platform and not just their loans, why not buy a bit of Assetz Capital (currently available via the Seedrs web site)
I only went in for Loan 1. I usually avoid additional loans.
I've pledged a small amount against AC on Seedrs, but afraid it's lower than otherwise due to lack of p&l information available plus I'm not a huge fan of convertible loans. I also expect the other platforms to go down the same route. which will win? Will post back in 2 years with results
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Thanks, I saw in ablrate's general FAQ for borrowers that loans can be repaid back early although sometimes may incur fees. There is no obvious guidance for investors whether they will see any of those fees. Per the standard T&Cs:
So, although Ablrate might have the right to charge an early redemption fee on the lenders' behalf, and accommodates the concept in its T&Cs, as the lender you should probably work on the assumption you are usually not going to get one. The Fees section of the Supplementary Terms for this particular loan proposal said there are no fees to the lender on the loan and didn't make any specific reference to early redemption - so it should be assumed that if the borrower pays up early instead of on time, they're just subject to standard T&Cs where ablrate gets a fee and the investors don't.When a Borrower redeems their loan early, there will be a fee of 0.08% per outstanding month of the loan amount payable to Ablrate and Ablrate reserves the right to charge an early redemption fee to be paid to Lenders
In this particular case the principal is due to be paid off in one bullet at the end rather than amortised, so if all goes to plan you'd get the full headline rate for the full term with the only receipts being interest and not principal as you go along. It just might stop early if it makes business sense to the borrower to pay you off.
I agree you do need to work out all the hassle factors in advance; in terms of functionality, P2P is sometimes described as a halfway house between a simple deposit account and a full direct commercial loan - but in reality it should be taken as seriously as the latter including an assessment of the loan terms, the borrower and the middleman to work out what cashflows you might experience and when.0
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