Directors ready to produce a proposal for fees following a judicial loss
The Lendy RSM administrator is set to produce a fee proposal that he will share with the Lendy Action Group (LAG), after losing his lawsuit against investors in the collapsed peer-to-peer lending platform.
Last month, the LAG won its case against RSM, with the judge ruling that Model 2 (M2) investors would have priority in distribution payments over Model 1 (M1) investors.
M1 investors are defined as creditors, which means their contingent payments will be pooled with other creditors, including Lendy’s directors, while M2 lenders are defined as investors, which means they may be able to recover funds directly from the loans they have helped fund. .
In an investor update, RSM noted the court ruling that M2 loan realizations do not fall under the
Lendy real estate and are held by the platform solely for the benefit of M2 investors.
However, he said the final amount of M2 loan outputs is not yet certain as the costs Lendy incurred to raise and realize these funds have yet to be agreed.
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RSM said it is currently reviewing the platform’s current and historical cost structure with Lendy’s team and advisors in light of the judgment. As part of this review, RSM will consider how the costs of M2 loans will be covered in accordance with court instructions and the interests of Lendy’s creditors.
After completing the analysis, RSM said it intends to produce a fee proposal that will be shared and discussed with the LAG and the conflict administrators of Saving Stream Security Holding Limited (SSHL), a legal entity of Lendy who was responsible for enforcing security on behalf of the platform’s instructed lenders.
RSM said it is likely it will also consult with the city regulator and Lendy’s creditors committee on the fee proposal.
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There are three categories of costs that the fee proposal will consider: direct costs and expenses of M2 loans; costs of fulfilling M2 loans that cannot be directly attributed to a particular M2 loan, for example, staff overheads; and the costs of administering Lendy, such as general execution and collection costs, and investor correspondence.
“The co-administrators have already made interim distributions on the majority of the loans that have been made and funds remain held in the client account for loans that have not yet been distributed,” RSM said in the update. investor day.
“Please note that no further distribution will be processed until a cost structure has been agreed for Model 2 loans.”
After losing the lawsuit last month, RSM said he would follow the judge’s instructions regarding investor payments, but warned that further court instructions may be needed regarding the distribution of funds from the collapsed platform.
Lendy entered administration in 2019, with over £ 160million overdue on his loan portfolio and at least £ 90million of those funds in default. Administration costs have since passed the £ 3million mark.