Wind Down Arrangements
What happens if Assetz Capital plans to stop operating the platform?
Whilst Assetz Capital’s current strategy is to maintain and grow its peer-to-peer lending platform, there are circumstances which may impact on that strategy – for example, changes in the market which cause Assetz Capital to change strategy or material changes to commercial and economic conditions.
Consequently, and as also required by Regulations, we have devised a “Standby Plan” which is intended to ensure that even if we decide – or are obliged – to stop operating our peer-to-peer lending platform at any point in the future, the investments which have been made through it are not impacted.
What is the Standby Plan?
Our Standby Plan is in fact a series of plans with different strategies so as to achieve the optimum outcome if the plan is ever put into action. Broadly, the strategies making up the plan are:
- Transfer of the entire platform to another business (which may or may not already operate a P2P platform) – in this scenario it is likely that the platform would continue to operate broadly as normal but under new ownership and lenders could decide whether or not to continue to invest on the platform;
- Sale of the loan book to another lending company (which may or may not operate a P2P platform) – in this scenario the sale proceeds of the loan book would be used to repay lenders for their interest in the outstanding loans (or such proportion as the sale proceeds would allow) and then cash would be returned to lenders in a relatively short period;
- Wind down of the loan book over the normal term of the loans – the platform would close to new business and the loans would be collected out and funds returned to lenders over the agreed terms of the loans, or earlier if loans are redeemed early.
Due to the nature and complexity of managing such significant potential change to the platform we have engaged the services of advisors (our current provider is RSM Restructuring Advisory LLP and its associated company Baker Tilly Creditor Services LLP (“RSM”)) to provide a “Standby Service”. Our Standby Service provider works with us continuously to ensure that they understand in detail how the platform is operating and how best to implement the above strategies should we decide at any point in the future that the Standby Plan may need to be implemented. In the event the Standby Plan is triggered, we would engage RSM to manage the implementation of the plan under terms we have already agreed with them.
Operative clauses in contracts
The P2P loans we arrange and manage on behalf of lenders are not impacted by any of the strategies envisaged in our Standby Plan.
Assetz Capital may assign its interest in the loans, as loan servicing agent, to a third party and borrowers would still need to comply with the terms of the loans and the security arrangements in force.
Under our terms and conditions with lenders we are able to appoint an alternative agent to manage the loans on behalf of lenders if needed.
Neither our terms with borrowers, our terms with lenders or our relationship with the Assetz Capital Trust Company Ltd (which holds the security for loans) are impacted by a potential insolvency of the platform should that occur during the implementation of the Standby Plan.
Wind Down Arrangements
The third strategy under the Standby Plan involves winding down the loan book over the natural term of the loans directly by Assetz Capital under its normal operations.
It is the fall-back strategy if the platform or loan book sales strategies do not succeed. As a result, we outline further details of those wind down arrangements here:
- RSM would be appointed to work with a core team of Assetz Capital staff tasked with maintaining the loan monitoring operations of the platform. Depending on conditions at the time, in order to protect core operations from potential claims of creditors, this may be via an Insolvency process such as an Administration or a CVA;
- Under RSM’s supervision, the core team would intend to carry out the following actions:
- reduce the functionality of the platform to simplify operations, namely – cease accepting new investors or deposits, cease advancing new loans or providing new funding on existing loans and suspending the secondary market and Access Accounts;
- engage with borrowers to ensure continuity of relationship and service, and that repayments continue to be made;
- process repayments through the client money systems, returning funds to investors’ accounts on the platform;
- continue to operate the Provision Funds in line with our Provision Fund policy;
- facilitate withdrawals by lenders from the platform once repayments were credited to their account;
- With the support of the core team, RSM would continue to attempt to re-finance some loans on the platform to other commercial lenders, in particular Development loans, which platform lenders would be unable to continue to fund. This is intended to accelerate the return of funds to investors ahead of the standard terms of loans on the loan book;
- Funds held in the client money account upon the appointment of RSM, and funds paid into the client money account by borrowers over the course of the wind down would continue to be held in a segregated client money account operated under the existing CASS permissions of Assetz Capital by its core team, until withdrawn by investors via the normal process;
- The services of Goji, who support IFISA administration for the platform, would continue with the intention that Assetz Capital’s IFISA manager status continued and the tax-free status of IFISA investments on the platform was retained.
The Provision Funds we offer do not give you a right to a payment so you may not receive a pay-out even if you suffer loss. The funds have absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the Provision Funds when considering whether or how much to invest.
Please see also our Provision Fund policy
Risks to Standby and Wind Down Arrangements
We have engaged experts to advise on the adequacy of our Standby Plan and Wind Down Arrangements and we believe that, if implemented, there is a reasonable prospect of them leading to an orderly cessation of our P2P operations. But there are always risks that assumptions made during the planning process prove to be incorrect if they are ever tested in practice and/or the operating environment subsequently changes.
Specifically, whilst we believe we have addressed and mitigated these risks in our existing plans, the following risks may arise:
- If there is insufficient funding available to pay for the costs of collecting the loan repayments over the life of the loans, that activity may cease leaving no means to return lenders investments to them – in our estimation, the monitoring income Assetz Capital is entitled to under the loan agreements is more than sufficient to cover the expected costs of winding down the loan book;
- That services in a wind down are provided by entities which do not have the same permissions as Assetz Capital and as a result the same regulatory protections do not exist throughout the wind down period – we are advised by our experts RSM that between the continuing permissions of Assetz Capital and their own permissions that there should be no decrease in regulatory protection during a wind down period;
- The vast majority of funds invested on the platform at the point Wind Down Arrangements are triggered would be in loans owed by borrowers rather than held as client money by Assetz Capital at that time. A lender’s entitlement to client money at the point Wind Down Arrangements are triggered would therefore not include those balances not yet received from borrowers. However, it is the intention of Assetz Capital’s Wind Down Arrangements is that its existing client money operations continue as normal during the wind down process and no change to its client money permissions is expected.