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Saving Stream default repaid in full
Saving Stream have announced that they have repaid all lenders for loan PBL020, along with interest. There was a shortfall in the realised amount following the sale of the asset, but this has been covered by the Saving Stream provision fund. This has been welcomed by lenders.
Speaking to Saving Stream at LendIt Europe last year the company stated that they believed lenders would be fully repaid. The additional of interest after the default was unexpected, but perhaps welcomed by lenders who had continuted to purchase loan parts after the default.
Here is a copy of the email sent to lenders, which borrower details redacted:
We would like to announce the full repayment of the above loan. All investors should now have their capital credited to their Saving Stream accounts. The accrued interest to date will be included in the end of the month interest payments.
In December 2014, Lendy Ltd advanced £1,700,000 of Saving Stream investors funding in bridging finance to [redacted], to fund the [redacted] Garden Centre project. When sale negotiations fell through nine months ago, the loan went into default. Since then Lendy Ltd and our appointed agents have been working closely with the borrower to effect a satisfactory outcome.
We are pleased to confirm that today the matter concluded with the successful sale. While the project did not meet its original sale objective, it was sold for £1.3m, with the difference in capital made up by our Provision Fund. As a result none of the 1,156 lenders in this loan will lose any capital. Over the past two years, lenders have collectively earned over £170,000 in interest on this loan, based on the gross annual return of 12%.
Our auditors have conducted a thorough review of this loan and are satisfied that Lendy Ltd advanced the loan on a sound commercial basis and that our underwriting and due diligence were conducted in a stringent and thorough way. Users of the Lendy platform can be assured that Lendy takes a responsible approach to lending, and will always take every possible precaution to prevent a loan defaulting.
The loan was defaulted in May 2016 when the sale of the asset fell through and lenders stopped receiving interest at that time. At the time the loan was already a year overdue and Saving Stream stated that lenders may not receive all of their capital if there was any shortfall in the value realised against the loan amount.
Here are the comments posted in May 2016:
As the borrower has not repaid the loan, Lendy is, on your behalf and at Lendy's option, enforcing the default procedures set out in the loan agreement with the borrower (clause 5.2). Once the assets have been realised Lendy will repay your investment. In the event that there is a shortfall then Lendy will pay you a proportion of the recovery proportionate to the amount invested by you in the loan (clause 5.3.1)
The reaction on the P2P Independent Forum was positive. A regular contributor on the forum stated:
Also worth noting that the borrower paid £1,475,000 for the Garden Centre, so the LTPV was 115% - The purchase value should always be disclosed to investors, in this case, it wasn't. If you work out the actual loan, it does seem that this was a 100% loan, with no collateral coming via the borrower at all.
I wonder if we will ever find out what the deal was with Lendy having a 10% share in the failed business (i.e. the borrower)... I guess not
In any case, a satisfactory result for all involved; good to see that nobody lost any money, but I hope investors don't see it as a precedent. This was on the old T&Cs and the PF is still discretionary
The provision fund wording has also been modfied. Below is the old wording:
The Fund will have a minimum balance of 2% of the total live loan amount at any time. Every time a new loan is made a portion of the fee charged to the borrower is paid into the Provision Fund (the amount is dependent on the loan size). It is also important to note that in the event of a default in excess of the Provision Fund value it may not be possible to cover all claims from Saving Stream investors.
Below is the new wording, with differences highlighted in bold.
The Fund will aim to have a minimum balance of 2% of the total live loan amount at any time. Every time a new loan is made a proportion of the fee charged to the borrower is paid into the Provision Fund (the amount is dependent on the loan size). If the Provision Fund is used to cover a shortfall in asset disposal, then it may take time to top the Provision Fund back up from company cashflow.