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Saving Stream Shifts to True Peer-to-Peer




By Ryan Weeks on 22nd September 2015


Saving Stream is transitioning into a true peer-to-peer model.

 

Saving Stream is a secured lending platform that has to date lent just over £60m to UK SMEs. The platform used to secure all loans against luxury assets, such as yachts, but these days it is much more focused on property. All Saving Stream loans carry a maximum LTV of 70%.

 

The process of investment is also changing, according to a "General Update" that has been circulated by the platform. Until now, Saving Stream’s investors lent money to a separate company called Lendy Ltd., which then lent that money out to the platform’s borrowers. This certainly represents a form of alternative finance, but it is not technically “peer-to-peer”. Neither in our eyes, nor (we suspect) in the eyes of the regulator.

 

The problem with this structure was that, as a lender, your exposure was to Lendy Ltd. One bad loan could, in theory, have caused Lendy Ltd. to enter into financial difficulty. The new peer-to-peer structure seeks to eradicate this risk. Saving Stream’s investors now lend to borrowers via Lendy Ltd. and a “nominee company” by the name of Saving Stream Security Holding Ltd. This nominee structure holds security on behalf of the platform’s lenders, and generally manages investment on behalf of those lenders such that the borrowers only have to deal with a single entity, rather than hundreds or thousands of individuals.

 

The platform’s provision fund – which launched in January – will be maintained, offering coverage of at least 2% of the platform’s loan book. The old structure meant that Lendy Ltd. was responsible for absorbing any losses. That burden of responsibility now passes to the lenders, as they now have direct exposure to the platform’s borrowers. But the platform’s security and provision fund will continue to provide coverage to those lenders, who collectively have not sustained a single loss by investing through Saving Stream thus far – despite the fact the platform has suffered a default.

 

The manner in which Saving Stream investors are paid interest on a defaulted loan will also change. In the past, Lendy Ltd. continued to pay interest at the normal rate of 1% per month if a loan entered into default. Going forwards, lenders’ will continue to accrue interest in theory, but the amount that is ultimately paid out will depend upon how much money the platform is able to recover from the defaulted loan. 

Comments

philippe

26 Sep 2015 12:33am

all loans switched to new structure with immediate effect, so yes current loans already made have switched to new structure

James

22 Sep 2015 01:33pm

What about coverage of what they are considering for existing loans: moving them to the new structure as well? Is it the view of the editor of altfi news that: 1. A borrower, Lendy, should be allowed to change its existing loan contracts to remove its liability to those who lent it the money (the P2P investors) and substitute instead the place that Lendy lent the money to? 2. A borrower, Lendy again, should be allowed to change how it pays interest on its loan contracts if those it lent the money to default, even though Lendy itself hasn't defaulted? Change 1 is particularly important to investors who lent money under the previous contract knowing that they could lends as much as they wanted to one loan to Lendy without regard to who Lendy was lending to, because it was Lendy on the hook, not the place Lendy was lending to. For future loans the news is OK. Much more problematic is the decision of a borrower, Lendy, to remove its own liability and reliability of its own interest payments on existing loan contracts. Whatever term Lendy is relying on to remove its liability looks like a textbook example of a term that is an unfair one in a consumer contract.


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