jaswells
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Post by jaswells on Dec 17, 2018 21:15:58 GMT
To come back to the question I have a few thoughts on this.
1) In my brief few years in the bond market I believe it to be relatively efficient. In other words, the 12 % YTM for Lowell is likely indicative of a high risk investment. It would probably take significant time and resources to recognize this and support with data and information.
2) However, this does not necessarily mean its a bad investment. Across the corporate bond market rates are significantly above what can be found elsewhere for retail investors. With the added liquidity offered by Wisealpha this makes a compelling case for the Wisealpha product. In truth risk-reward profile for most uk investment (including cash) is pretty poor.
3) In comparison to p2p it would appear a good investment. You can cherry pick lendy, FS investments that have done well. IME I have been with Moneything, Lendy and FS for a few years and spread across probably a few hundred loans. I will/have got nothing close to 12% returns over that time. Personally I have found DD more straightforward with corporate bonds than the murky world of p2p borrowers, although less entertaining.
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ozboy
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Mine's a Large One! (Snigger, snigger .......)
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Post by ozboy on Dec 17, 2018 21:20:10 GMT
To come cack to the question I have a few thoughts on this. 1) In my brief few years in the bond market I believe it to be relatively efficient. In other words, the 12 % YTM for Lowell is likely indicative of a high risk investment. It would probably take significant time and resources to recognize this and support with data and information. 2) However, this does not necessarily mean its a bad investment. Across the corporate bond market rates are significantly above what can be found elsewhere for retail investors. With the added liquidity offered by Wisealpha this makes a compelling case for the Wisealpha product. In truth risk-reward profile for most uk investment (including cash) is pretty poor. 3) In comparison to p2p it would appear a good investment. You can cherry pick lendy, FS investments that have done well. IME I have been with Moneything, Lendy and FS for a few years and spread across probably a few hundred loans. I will/have got nothing close to 12% returns over that time. Personally I have found DD more straightforward with corporate bonds than the murky world of p2p borrowers, although less entertaining. I think, with P2P, you also need to find and factor in the downright lies, deception and misleadings from the some Platforms. I am not joking.
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Post by mrclondon on Dec 17, 2018 22:24:48 GMT
Hi mrclondon, its common practice in the corporate bond world to use Lux issuing entities for tax structuring reasons. [...] Obviously a lot of large institutions and banks operate in the corporate bond market and so these approaches have become standardised over a long period of time. [...] I think this is all a matter of perception - clearly a lot of sophisticated lenders and banks feel comfortable with the way corporate bonds are structured as they are familiar with it, just in the same way you are more comfortable with the evolving P2P market. Each to their own I guess, but knowing both markets like I do I know what I prefer! Just to make a wider political point, maybe companies operating in the UK should voluntarily remit to HM Treasury the tax they have avoided through the use of offshore financial structures where the use of such structures can not be avoided.
What I'm comfortable with is only investing directly (whether in equity or debt) in companies and financial structures that I'm able to analyse and assess the risks of that investment against my own life experiences. Beyond that I utilise professional fund managers to invest in the wider debt and equity markets.
What I'm distinctly uncomfortable with is being tagged on a social media site with an investment opportunity in a company I've never heard of, that has complex financial structures in the UK even before offshore entities are considered and that I don't have the ability to analyse in depth.
As you say each to their own.
I came into p2p in 2006 via zopa, with the concept of direct person to person lending appealing. No complexity - I lent £10, which someone borrowed from me. No offshore entities involved.
EDIT: Just to ram home the point about uneccessarily complex structures, an earlier wiseaplha bond offering was to Tesco PLC (ISIN XS0248395245 ) listed on London Stock Exchange. Tesco PLC is of course itself listed on the LSE. I've heard of Tesco (!) ... I've used their stores in UK, Europe, and the disasterous Fresh and Easy in the States. I can follow their group accounts, which are reliably filed each year in month 5 or 6 following the year end. And from time to time I have invested directly in Tesco's equity, and wouldn't rule out debt or equity investments in Tesco in the future (but not currently due to brexit concerns if they have to adapt their supply chains to source more from outside EU).
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macq
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Post by macq on Dec 17, 2018 23:42:32 GMT
while i would not knock the company(Lowell) or corporate bonds in general & like the idea of WA i feel it would be fair to mention that the bonds are yielding more at the moment due to a drop in price and i presume a lack of confidence at the moment.But to be fair some are offering less yield due to the reverse happening While it may seem true that bonds are safer then P2P a bond from the likes of Debenhams may be paying a high yield (think its been a least 16% if not more) but would look a risky bet as the HOF bonds proved.So the title of this thread maybe a bit misleading and feel sometimes the downside is underplayed for the average investor
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macq
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Post by macq on Dec 17, 2018 23:48:55 GMT
To come cack to the question I have a few thoughts on this. 1) In my brief few years in the bond market I believe it to be relatively efficient. In other words, the 12 % YTM for Lowell is likely indicative of a high risk investment. It would probably take significant time and resources to recognize this and support with data and information. 2) However, this does not necessarily mean its a bad investment. Across the corporate bond market rates are significantly above what can be found elsewhere for retail investors. With the added liquidity offered by Wisealpha this makes a compelling case for the Wisealpha product. In truth risk-reward profile for most uk investment (including cash) is pretty poor. 3) In comparison to p2p it would appear a good investment. You can cherry pick lendy, FS investments that have done well. IME I have been with Moneything, Lendy and FS for a few years and spread across probably a few hundred loans. I will/have got nothing close to 12% returns over that time. Personally I have found DD more straightforward with corporate bonds than the murky world of p2p borrowers, although less entertaining. Genuine question out of interest where do you see the added liquidity offered by WA? Would think with them in the middle with a note between you and the bond it would be less or so it seems.Or maybe you mean being able to buy smaller amounts then normal P.s you may want to change the 3rd word in the post
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yangmills
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Post by yangmills on Dec 18, 2018 0:02:05 GMT
Might be useful if someone could explain why the price of this bond dropped so rapidly in the past few months (see chart link). Also why the 5-year CDS spread on this company exploded from just 500bp to 1200bp between the middle of Oct and now. It's now at a cumulative implied default probability of 64.4%. Clearly something happened to trigger this sort of move. The only thing I could see on Bloomberg was this short story: Lowell Bonds Fall to Record Low as New Secured Funding Announced (Bloomberg) -- Lowell’s bonds fell to a new low Thursday after Europe’s second-largest debt collector confirmed plans to issue debt that will get paid before existing notes. The Leeds, England-based company “has signed and drawn-down in full” a £255 million ($328 million) credit facility backed by the firm’s portfolio of non-performing consumer loans, it announced in a statement alongside quarterly earnings. Lowell’s £230 million of 11 percent notes, its most junior securities which are due in November 2023, fell 7 pence on the pound to a record-low of 86 pence, according to data compiled by Bloomberg. More senior bonds also fell to a record low. Lowell Chief Financial Officer Colin Storrar said in an interview in August that some creditors were concerned about its potential plans to issue asset-backed debt because it would subordinate their claims. Nonetheless, he said the creditors appreciate the need for the company, which buys and seeks to recover value on unpaid credit cards, cellphone bills and other consumer debt, to fund growth as cheaply as possible. The asset-backed loan will pay 2.75 percent above benchmark rates, according to the Thursday statement. Related tickers: 1433746D LN (Lowell GFKL Group) 727032Z LN (Permira Holdings LLP) Garfunkelux Holdco 2 has Euro 2.54billion of secured debt. Euro 155 million in principal and interest is due within the next 12 months. The company has a B2 long-term rating from Moody's and a B+ long-term local currency rating from Standard & Poor's.
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jaswells
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Post by jaswells on Dec 18, 2018 4:22:19 GMT
To come cack to the question I have a few thoughts on this. 1) In my brief few years in the bond market I believe it to be relatively efficient. In other words, the 12 % YTM for Lowell is likely indicative of a high risk investment. It would probably take significant time and resources to recognize this and support with data and information. 2) However, this does not necessarily mean its a bad investment. Across the corporate bond market rates are significantly above what can be found elsewhere for retail investors. With the added liquidity offered by Wisealpha this makes a compelling case for the Wisealpha product. In truth risk-reward profile for most uk investment (including cash) is pretty poor. 3) In comparison to p2p it would appear a good investment. You can cherry pick lendy, FS investments that have done well. IME I have been with Moneything, Lendy and FS for a few years and spread across probably a few hundred loans. I will/have got nothing close to 12% returns over that time. Personally I have found DD more straightforward with corporate bonds than the murky world of p2p borrowers, although less entertaining. Genuine question out of interest where do you see the added liquidity offered by WA? Would think with them in the middle with a note between you and the bond it would be less or so it seems.Or maybe you mean being able to buy smaller amounts then normal P.s you may want to change the 3rd word in the post Word changed thanks. I am referring to by ability to sell WA notes quite quickly when I needed some cash a few weeks ago. With good liquidity and reasonable yields it seems a good investment. With a low spread this becomes competitive with stocks and shares without the volatility. Of course I could only dream of such opportunity to cash in on vast swathes of my p2p loans which I now look to be stuck in for years with a strong chance of not getting my full capital returned.
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macq
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Post by macq on Dec 18, 2018 8:01:16 GMT
Genuine question out of interest where do you see the added liquidity offered by WA? Would think with them in the middle with a note between you and the bond it would be less or so it seems.Or maybe you mean being able to buy smaller amounts then normal P.s you may want to change the 3rd word in the post Word changed thanks. I am referring to by ability to sell WA notes quite quickly when I needed some cash a few weeks ago. With good liquidity and reasonable yields it seems a good investment. With a low spread this becomes competitive with stocks and shares without the volatility. Of course I could only dream of such opportunity to cash in on vast swathes of my p2p loans which I now look to be stuck in for years with a strong chance of not getting my full capital returned. that makes sense and can see what you mean and its also good to know selling went ok
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jaswells
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Post by jaswells on Dec 18, 2018 8:07:08 GMT
I expected longer but actually took me 3 days to liquidate about 5k of bonds. It probably depends on what your selling though. I am not sure if secondary market sellers go to the back of the queue behind WA notes for sale or take priority, maybe WA could comment on this?
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macq
Member of DD Central
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Post by macq on Dec 18, 2018 8:12:06 GMT
Might be useful if someone could explain why the price of this bond dropped so rapidly in the past few months (see chart link). Also why the 5-year CDS spread on this company exploded from just 500bp to 1200bp between the middle of Oct and now. It's now at a cumulative implied default probability of 64.4%. Clearly something happened to trigger this sort of move. The only thing I could see on Bloomberg was this short story: Lowell Bonds Fall to Record Low as New Secured Funding Announced (Bloomberg) -- Lowell’s bonds fell to a new low Thursday after Europe’s second-largest debt collector confirmed plans to issue debt that will get paid before existing notes. The Leeds, England-based company “has signed and drawn-down in full” a £255 million ($328 million) credit facility backed by the firm’s portfolio of non-performing consumer loans, it announced in a statement alongside quarterly earnings. Lowell’s £230 million of 11 percent notes, its most junior securities which are due in November 2023, fell 7 pence on the pound to a record-low of 86 pence, according to data compiled by Bloomberg. More senior bonds also fell to a record low. Lowell Chief Financial Officer Colin Storrar said in an interview in August that some creditors were concerned about its potential plans to issue asset-backed debt because it would subordinate their claims. Nonetheless, he said the creditors appreciate the need for the company, which buys and seeks to recover value on unpaid credit cards, cellphone bills and other consumer debt, to fund growth as cheaply as possible. The asset-backed loan will pay 2.75 percent above benchmark rates, according to the Thursday statement. Related tickers: 1433746D LN (Lowell GFKL Group) 727032Z LN (Permira Holdings LLP) Garfunkelux Holdco 2 has Euro 2.54billion of secured debt. Euro 155 million in principal and interest is due within the next 12 months. The company has a B2 long-term rating from Moody's and a B+ long-term local currency rating from Standard & Poor's. Not even close to being an expert but the price could have been effected over the last few months by reports/rumors of hedge funds stalking the company and the debt sector in general.But to be fair this alleged weakness could be true of P2P as well i guess
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Post by Wisealpha on Dec 18, 2018 13:19:39 GMT
Hi mrclondon, its common practice in the corporate bond world to use Lux issuing entities for tax structuring reasons. [...] Obviously a lot of large institutions and banks operate in the corporate bond market and so these approaches have become standardised over a long period of time. [...] I think this is all a matter of perception - clearly a lot of sophisticated lenders and banks feel comfortable with the way corporate bonds are structured as they are familiar with it, just in the same way you are more comfortable with the evolving P2P market. Each to their own I guess, but knowing both markets like I do I know what I prefer! Just to make a wider political point, maybe companies operating in the UK should voluntarily remit to HM Treasury the tax they have avoided through the use of offshore financial structures where the use of such structures can not be avoided.
What I'm comfortable with is only investing directly (whether in equity or debt) in companies and financial structures that I'm able to analyse and assess the risks of that investment against my own life experiences. Beyond that I utilise professional fund managers to invest in the wider debt and equity markets.
What I'm distinctly uncomfortable with is being tagged on a social media site with an investment opportunity in a company I've never heard of, that has complex financial structures in the UK even before offshore entities are considered and that I don't have the ability to analyse in depth.
As you say each to their own.
I came into p2p in 2006 via zopa, with the concept of direct person to person lending appealing. No complexity - I lent £10, which someone borrowed from me. No offshore entities involved.
EDIT: Just to ram home the point about uneccessarily complex structures, an earlier wiseaplha bond offering was to Tesco PLC (ISIN XS0248395245 ) listed on London Stock Exchange. Tesco PLC is of course itself listed on the LSE. I've heard of Tesco (!) ... I've used their stores in UK, Europe, and the disasterous Fresh and Easy in the States. I can follow their group accounts, which are reliably filed each year in month 5 or 6 following the year end. And from time to time I have invested directly in Tesco's equity, and wouldn't rule out debt or equity investments in Tesco in the future (but not currently due to brexit concerns if they have to adapt their supply chains to source more from outside EU). Interesting to see all the thoughts here - the reason for starting the thread from my side was to see how folks on the forum think about relative value and risk across different types of lending areas and what would be helpful for us to give more education about in our blogs. There's obviously something positive to be said for helping consumers and SMEs through P2P lending and in the old days when most of it was lending to people and businesses you could see and talk to there was some beauty in the simplicity. Nowadays more and more lending is getting packaged up by the platforms so in it's interesting to compare those to lenders who issue in the bond market. Lowell's senior secured bond for example is not dis-similar from the bonds Wellesley, Lendy or Lendinvest have structured save for using a LUX issuer. One thing I like about the corporate bond world is that you get a whole spectrum of risk/rewards and different industries, all the way from the more vanilla Tesco's of this world to consumer lenders.
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Post by Wisealpha on Dec 18, 2018 13:50:37 GMT
Might be useful if someone could explain why the price of this bond dropped so rapidly in the past few months (see chart link). Also why the 5-year CDS spread on this company exploded from just 500bp to 1200bp between the middle of Oct and now. It's now at a cumulative implied default probability of 64.4%. Clearly something happened to trigger this sort of move. The only thing I could see on Bloomberg was this short story: Lowell Bonds Fall to Record Low as New Secured Funding Announced (Bloomberg) -- Lowell’s bonds fell to a new low Thursday after Europe’s second-largest debt collector confirmed plans to issue debt that will get paid before existing notes. The Leeds, England-based company “has signed and drawn-down in full” a £255 million ($328 million) credit facility backed by the firm’s portfolio of non-performing consumer loans, it announced in a statement alongside quarterly earnings. Lowell’s £230 million of 11 percent notes, its most junior securities which are due in November 2023, fell 7 pence on the pound to a record-low of 86 pence, according to data compiled by Bloomberg. More senior bonds also fell to a record low. Lowell Chief Financial Officer Colin Storrar said in an interview in August that some creditors were concerned about its potential plans to issue asset-backed debt because it would subordinate their claims. Nonetheless, he said the creditors appreciate the need for the company, which buys and seeks to recover value on unpaid credit cards, cellphone bills and other consumer debt, to fund growth as cheaply as possible. The asset-backed loan will pay 2.75 percent above benchmark rates, according to the Thursday statement. Related tickers: 1433746D LN (Lowell GFKL Group) 727032Z LN (Permira Holdings LLP) Garfunkelux Holdco 2 has Euro 2.54billion of secured debt. Euro 155 million in principal and interest is due within the next 12 months. The company has a B2 long-term rating from Moody's and a B+ long-term local currency rating from Standard & Poor's. My thoughts to help out: - Economic factors - generally a more cautious sentiment to the consumer debt market (perceived as higher risk given the economic uncertainty) and Brexit discussions. Has affected the wider corporate bond market as well but some industries are weaker than others and bonds better held. Bond markets tend to price in economic risk whereas there is a delayed reaction at the grass roots lending level. Potentially parliament get their act together and avoid a no deal Brexit which leads to a market bounce. - Technical factors - this is a large and liquid bond and so this technical (i.e. there is a large number of lenders which means more sellers - in an over the counter market where market makers want to be short risk selling can weigh on price). These are the types of situation long-term capital takes advantage and people looking for absolute return enjoy. - Many were also expecting the unsecured 11%'s to be refinanced and cost of funding reduced but market conditions weakened and the company instead went to the ABS market for further sources of funding - The article you quote is representative of some institutional investors not understanding the transaction (yes it happens in the institutional market as well). This was a non-recourse transaction, meaning the ABS did not prime the bondholders. This transaction was actually a net positive as the company raised more liquidity which is good for all bondholders and particularly the secured bondholders and the RCF was cleaned down. In any case what's more interesting is whether 12-13% here offers better risk reward than other types of consumer credit investment opportunities.
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Post by Wisealpha on Dec 18, 2018 13:53:36 GMT
I expected longer but actually took me 3 days to liquidate about 5k of bonds. It probably depends on what your selling though. I am not sure if secondary market sellers go to the back of the queue behind WA notes for sale or take priority, maybe WA could comment on this? Hi Jaswells - we tend to push users to the front of the queue to help folks but we don't guarantee it (yet). We're obviously keen to continue improving liquidity.
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Post by Wisealpha on Dec 18, 2018 13:56:22 GMT
Another post saying everything and nothing. What would you like me to talk about?
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Post by Wisealpha on Dec 18, 2018 16:15:52 GMT
I replied to the direct questions before, but let me know if I missed anything.
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