Lendy loan book ‘significantly worse’ than expected with ‘unacceptable’ AML records

This included anti-money laundering (AML) records that were “unacceptable” and a loan book that was “in a significantly worse state” than initially expected.

They also announced that fees for their first six months’ work had surpassed £1.7m – far exceeding the £1m originally projected for the first year.

This will mean investors are hit even harder than they had feared as all fees are taken from the funds reclaimed.

In a progress report published yesterday, the joint administrators from RSM Restructuring Advisory detailed the substantial failings they found upon taking control of the collapsed lender.

Complex, difficult, time-consuming

Explaining how they found the business, joint administrators Phillip Sykes, Damian Webb and Mark Wilson said: “The loan book has proved to be in a significantly worse state than was immediately ascertainable on our appointment.

“Negotiations with borrowers and overseeing both the realisation of property assets and the performance of receivers and administrators to realise secured assets have been complex, difficult and time-consuming.”

Regarding Lendy’s AML checks they added: “The state of the company’s records to comply with current AML regulations was unacceptable.

“We have therefore had to spend additional time and instruct external experts to ensure compliance before distributions would be made to investors.”

Around 8,000 investors, 79 per cent of the active cohort, have been verified through the fresh AML compliance checks – these investors hold around 90 per cent of the value of funds worth around £140m.

The remaining 2,100 investors have approximately £15m of funds on account.

Outstanding loans

So far just four development finance loans which were outstanding when Lendy collapsed have been realised, with £2.8m reclaimed from borrowers.

The 20 remaining live development loans have an outstanding value of £101m with 15 having formal insolvency proceedings against them, with either receivers or administrators being appointed.

And three have been placed into insolvency proceedings.

The bridging loan book is in a slightly better state with four loans contributing £4.5m in returns.

However there remain 22 live bridging loans with an outstanding value of £29m.

Of these, 16 have formal insolvency proceedings against them, with either receivers or administrators being appointed, with two placed into insolvency proceedings.

Legal claims ongoing

Legal claims have been made against several loans where the security property has already been realised and capital or interest is still owed.

This includes claims against personal or corporate guarantees, or claims for negligence on the part of one of company’s third-party professional advisers.

“There are a number of other loans where it is believed that the company has reasonable grounds for a claim and these are being reviewed,” the report added.

Explaining the increase in fees the administrators said: “Creditors will appreciate from the narrative above that this has proved to be a very much more complex administration than envisaged when we prepared our initial fee estimate of time costs for the first twelve months.”