Ablrate is always working to move forward with plans to scale our business, provide ever better technology and bring quality loan opportunities to our lenders.
There may be, however, circumstances where our strategy is no longer viable, such as a change in market conditions, regulation or the economic conditions as a whole.
In this scenario, and as also required by regulation, we have created a ‘Wind Down Plan’. This plan is intended to be an efficient and comprehensive plan for winding down the business so that there is minimal impact on those who have made investments in loans through Ablrate and also those with whom we do business.
What is the Wind-Down Plan?
There are a number of scenarios that have plans, such as if a disaster was to occur how our business would continue. The Wind Down Plan outlines the strategies employed to wind the business down in an efficient manner. This, combined with our P2P Resolution Manual (which aims to give instructions on operations of the business and systems) is aimed at ensuring an efficient wind-down or hand over of the business and/or the loan book.
The wind-down scenarios could include;
Transferring the platform and business to another entity/owner. It is likely that the platform would continue as normal in this scenario but would be held by new owners. Lenders would always have the choice to continue lending or not and in this scenario, we envisage the secondary market would stay open in order for lenders to continue to manage risk.
It may be a scenario where the loan book is sold to another business (who may or may not operate a P2P platform). In this scenario, the proceeds of the sale of the book would be used to repay lenders their capital and interest due.
Winding down the book over the term of the remaining loans would see us closed to new business but operating to collect capital and interest due until all loans are redeemed.
In the event that we need to implement the wind-down plan we envisage there being sufficient capital for Ablrate to remain solvent while running down the loan book. If the business were to become insolvent we have a Living Will arrangement with Kingston Smith LLP who would be engaged to find a buyer for the business and/or its loan book. We may, however, choose to work with a company that is authorised to run a P2P lending platform to run off our loan book.
Our goal in choosing a scenario would be driven by that which would least impact our lenders and those with whom we do business.
Operative clauses in contracts
The loans we arrange and monitor on behalf of lenders are not impacted by any strategy envisaged by our wind Down Plan.
Should we assign our agency in loans, as lenders agent or security agent to a third party, borrowers are still required to comply with the terms of the loans and the security arrangements we have in place.
Our terms and Conditions with lenders specify that we are able to appoint a third party to manage loans if we are required to do so.
The loans within the platform are bilateral between you and the borrower with Ablrate as agent. Therefore the terms with borrowers or lenders are not impacted by insolvency of the company.
Wind Down Arrangements
Where the Wind Down plan calls for the loan book to be wound down over the natural term of the loans we would take the following steps:
Critical staff would remain in place to manage the wind-down process. In an insolvency situation, this may mean that the company uses insolvency measures to protect from potential claims. This process could be Administration or a formal arrangement with creditors such as a Company Voluntary Arrangement.
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 (there may be limited operations of the secondary market to allow loan buyers to purchase from existing customers as a way to accelerate the wind-down through those willing to purchase the loans);
engage with borrowers to ensure repayments continue to be made; process repayments through the client money systems, returning funds to investors accounts on the platform;
The core team would continue to attempt to re-finance some loans on the platform to other commercial lenders. 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 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 Ablrate 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 Ablrate’s IFISA manager status continued and the tax-free status of IFISA investments on the platform was retained.
Risks – Wind Down Arrangements
We have engaged experts to advise on the adequacy of our 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. There are always risks that assumptions made during the planning process prove to be incorrect if they are ever tested in practice.
Specifically, whilst we believe we have addressed and mitigated these risks in our existing plans, the following risks will 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 – however, in our estimation, the income received by Ablrate under the loan agreements, as detailed in our Wind Down Plan, 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 Ablrate and as a result, the same regulatory protections do not exist throughout the wind-down period – however, should we choose a third party to wind down the loan book we would aim to ensure that there would be no decrease in regulatory scrutiny during a wind-down period;
Loans on Ablrate are bilateral, i.e they are between you and the borrower. Should Ablrate cease to be in business those rights still apply and you are entitled to the monies paid by the borrowers on a continuing basis. However, if Ablrate ceases operation you will be entitled to receive monies held in the client account but those monies that have not been received from borrowers (i.e future or outstanding payments) will not be due until they are paid by the borrower.