Collateral damage: The administration two years on
COLLATERAL investors are still in the dark about the recovery of their funds, two years after the peer-to-peer lender entered administration. The P2P pawnbroker and property lender collapsed in February 2018, but the administration process has been riddled with delays thanks to a dispute over the choice of insolvency practitioner, discrepancies in asset valuations and the lack of wind-down procedures.
An update in December 2019 from administrator BDO revealed it is still reconciling investor exposure to loans due to the state of Collateral’s IT systems, which should be complete early this year. It has taken enforcement action to recover funds on 14 properties and is looking to sell them. BDO said it was still waiting for a response from Collateral’s former directors over discrepancies in the client money account and with the valuations of the pawn-broking assets before they can be sold.
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“The liquidators will make a first distribution to investors once recoveries from the loanbook have reached a level sufficient to make a distribution process economic,” BDO said. “At present, we are unable to set a date for such a distribution, as it will depend to a significant extent on the timing of recoveries from the sale of properties.” It means investors are still awaiting repayment two years since Collateral entered administration.
In contrast, Lendy collapsed in May 2019 but by the end of last year the administrator RSM set out how it would start repaying some funds to investors. P2P industry consultant Theresa Burton said Lendy investors have benefited from the platform having a wind-down plan. “Collateral was never authorised by the Financial Conduct Authority so did not go through the process to demonstrate they had policies and procedures in place for a wind-down,” she said.
“Collateral thought it had interim permission. “Even if they had interim permission, that permission was only a registration procedure, there was no authorisation process with it.”
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Insolvency practitioners caution that no two cases are the same.
“Each insolvency appointment is unique, having its own circumstances which led to the appointment and individual objectives and strategies going forward,” Geoff Bouchier, managing director in Duff & Phelps’ restructuring advisory practice, said.
“Securing and reviewing company records and electronic data are of primary importance at the outset of any insolvency appointment.” He said property loanbooks take time to realise as they have to reach maturity and in the event of default, enforcement steps are then required to be taken. “The key throughout is for the insolvency practitioner to maintain a regular dialogue with the platform’s lenders,” he added.
