Collateral investors may have to join queue of creditors

COLLATERAL investors may end up having to recoup any unpaid interest owed as a creditor of the company, the administrator of the closed peer-to-peer lending platform has revealed.

An update from BDO said its initial view was that due to section 26 of the Financial Services and Markets Act – which deems that agreements with unregulated parties are unenforceable – investors would be treated as creditors.

This means they would have to submit documentation to BDO on what they are owed and wait to see what funds can be recouped through the administration.

Read more: FCA reveals it intervened in Collateral administration to protect investors

The BDO update said there have been a “limited number of receipts” into the Collateral bank account  in respect of the outstanding loans.

“The administrators have now obtained a significant volume of documentation in respect of the outstanding loans, which will enable them to take steps to recover the loans as they fall due,” BDO said.

“A significant portion of the loans are now past their redemption date. Now that the loan documentation has been obtained, the administrators have written to the borrowers seeking repayment of the loan amounts together with any additional interest as may be applicable.”

BDO said it has managed to extract information on investors and their total loan exposure but said Collateral’s IT platform had been decommissioned prior to its appointment so it does not have sufficient detail to extract an analysis of each investor’s investments into specific loans or tranches of loans.

BDO said it was in talks with the third-party IT provider to restore the data but said it would not be repurchasing the Collateral domain name as this would not assist the wind-down.

It was also revealed that all five members of Collateral staff had been made redundant prior to BDO’s appointment.

BDO said it was too early to provide an estimate on any return investors could receive but said a proposal to creditors would be issued on or before 22 June.

Refresh Recovery had been appointed as administrator for the platform after Collateral collapsed in February, when it emerged that it had been operating without the requisite regulatory permissions.

However, the FCA stepped in a month later to call for its own appointment, claiming that Collateral failed to seek approval for its choice of practitioner.