THE ADMINISTRATION of peer-to-peer lender Collateral has been held up after the Financial Conduct Authority (FCA) intervened in an attempt to appoint its own practitioner.
A progress report, seen by Peer2Peer Finance News, shows Refresh Recovery – which was appointed as administrator for Collateral in February – had several buyers expressing interest in the loanbook but is no longer able to continue interest payments or make any sale decisions, pending court action from the City watchdog to replace the insolvency firm.
The document says that Wigan-based Refresh Recovery was contacted in March by the FCA about appointing alternative administrators based in London, with a court hearing set but then adjourned until later this month.
“The matter was vigorously defended and it was subsequently adjourned to be heard again in April on the basis that certain restrictions were imposed on the administrator including the disposal of assets and funds being returned to investors,” Refresh Recovery’s administrator’s progress report and statement of affairs for Collateral said.
The document also says that Refresh Recovery has received 15 expressions of interest in buying all or part of Collateral, with one interested regulated party offering to buy the whole of the loanbook and satisfy investors at 100p in the pound.
This offer is still available pending the resolution of the FCA action but nothing can proceed and no interest payments can be made until the court makes a judgement later this month, the document says.
“Once matters regarding my appointment are resolved it is intended to realise the loanbook and based upon offers received to date this will be enough to pay investors and creditors in full and any balance thereafter will be distributed to members,” Gordon Craig, of Refresh Recovery, said in the document.
“It may be necessary to complete this task within a liquidation procedure. Alternatively if the the investors are paid in full the group will be moved to dissolution.”
The document shows that there is £15.6m of outstanding loans secured on properties valued at £23.5m as well as £1.6m secured against assets such as jewellery and artwork valued at £2.4m.
The report also provides alleged background on the events leading to the appointment of Refresh Recovery as administrator based on a submission from director Peter Currie, who set the business up with his brother Andrew.
It claims Collateral – which had applied for regulatory permissions in March 2016 – had received legal advice that it was not taking on regulated activities so later withdrew its application with the City watchdog.
However, its legal counsel is alleged to have advised Currie to change the way the company operated and that he needed to set up entities to deal with holding of the assets and the way in which loans were brought to the platform. As a result, two new limited companies – Collateral Sales and Collateral Security Trustee – were incorporated in September 2016 to encompass these changes.
The group claims to have had regular discussions with the FCA and legal advisers over 15 months from September 2016 regarding its operations.
“Throughout the period the group had five different case handlers at the FCA who reviewed the business and its undertakings, asked various queries and then matters would go quiet,” the document alleges.
Currie said he was contacted by the FCA in January 2018 to advise that the company was not deemed to be regulated and they should remove all reference to the City watchdog on the website, which he did.
Legal and compliance advisers then allegedly advised he stop all loans and close down the website, based on letters and emails from the FCA.
Andrew Currie was appointed director of Collateral in February 2018 to assist his brother with the business issues. The brothers claim that they did not have clear advice on how to deal the group going forward so sought advice from Refresh Recovery in accordance with a wind down procedure previously submitted to and “tacitly approved” by the regulator.
The brothers told Refresh Recovery that the company was unable to pay its debts when they fell due and consequently was insolvent, so the business recovery firm recommended it be placed into administration.
A spokesperson for Refresh Recovery declined to comment on the administration and the FCA court action.
The FCA did not respond to requests for comment.