The UK’s largest secured peer-to-peer business lender has announced a short-term plan to protect investors and borrowers during the COVID-19 pandemic.
Assetz Capital, which has lent over £1 billion to-date, has put in place a number of measures to help its borrowers navigate this unprecedented economic crash, including the possibility of forbearance. For its 38,000 investors, it has also introduced a nominal ‘loan servicing fee’ to ensure the long-term health of the platform.
Stuart Law, CEO at Assetz Capital said: “We’ve made fantastic progress in the last two weeks as we adjust to these new market conditions. Overall, we are realistically optimistic, with a solid plan developed by a vastly experienced team. We believe this won’t just see us through but help all our stakeholders thrive in the long-term.
“With the stock market currently down around 30% and property funds and some other peer-to-peer platforms completely closing withdrawals, we believe we are in a pretty reasonable position which we will build on over the coming weeks.
“When we started the business in 2013 we set out seeking to outperform other asset classes over the long term. That remains our aim today.”
In a video update, Stuart announced the following:
- Forbearance measures and lender vote: There is an expectation that many commercial mortgage holders will need to pause or reduce payments for an initial three month period, in line with government suggestions on time frame. This will be continually reviewed. In all reasonable circumstances borrowers will not be defaulted. Protecting their business, employees and supply chain, up to 100,000 individuals, is the priority. A lender vote on forbearance will take place shortly.
- Interest payments: Assetz Capital holds substantial sums in its borrower retention accounts. These retentions are for a variety of purposes, but this includes being able to pay lender interest for a period, even if a borrower stops paying. The business therefore expects to continue to pay the bulk of lender interest over the next few months. It is also adding a small servicing charge to borrowers to cover the extra work and cost of managing the loan book over this period but will add it to the loans meaning that borrowers won’t need to find further cash in the short-term.
- Introduction of loan servicing fee: Whilst the platform continues to offer attractive target rates of return, it is introducing what is expected to be a temporary small lender membership fee to cover increased loan servicing costs during this period. It has never charged a fee before but has reserved the right to do so. The fee is 0.9% per annum, which is 0.075% per month of the loans under management, starting on 1st May. For a typical lender with £20,000 of loan investments the lender loan servicing fee would be £15 a month. This is lower than most other platforms typical lender fees even in normal times.
- Lender updates to affected loans: Lenders will be updated regarding any immediately affected loans through the platform, although there are not many updates yet to process. Nonetheless, the loan to value (LTV) ratio for loans is expected to move up over time as project costs increase, duration of projects increases and potentially property values fall to some degree not yet known. As a result, lender safety margin is expected to narrow to some degree over time and some loans may also not comply with Assetz Capital lending guidelines or investment account limits. With valuers mostly not now working we don’t have the ability to carry out revised valuations at present, but it is also likely too early to do so. Lenders will be kept informed as this situation moves on.
- Withdrawals from Access Accounts: As previously announced, in common with all other asset classes, the platform is working in difficult market conditions and can’t offer the level of liquidity and ease of quickly withdrawing money from these accounts as normal. There is now an updated and live withdrawal system for the Access Accounts that is returning cash to lenders. A substantial number of people have also cancelled their initial withdrawal requests and last week there were very few new withdrawal requests. The slow-down in withdrawals is due to a combination of higher withdrawal requests for a couple of weeks recently, slower repayments of loans and far less refinancing of our loans by high street banks who have seemingly paused for thought. Speeds are expected to improve, but not yet, and so withdrawals will stay slower than normal for a while. Our liquidity has always been market-leading and these slower withdrawals are in line - or in some cases even faster - than what other platforms had even in normal market conditions.
Assetz Capital will continue to provide updates to its lenders and borrowers as this fluid situation evolves.