Lendy’s administrator is applying to court for legal advice on the proposed ‘distribution waterfall’ model for recovered funds, following a backlash from investors.
A letter from RSM to investors said it was seeking legal direction due to “the complexity of the matter” but warned the costs to the estate would be “considerable”.
Collapsed peer-to-peer property platform Lendy initially operated a structure whereby investors lent to Lendy itself, which then gave the money to borrowers, known as model 1. However, this was not deemed as a P2P arrangement and a new structure – model 2 – was set up from 2015, meaning that investors began funding the P2P loans directly.
RSM has decided that the model 1 group will be defined as creditors, but the model 2 group is investors, meaning that they will be treated differently with regard to the distribution of recovered funds.
Additionally, the contracts currently allow Lendy to receive some of the funds from recovered loans, although RSM has put this on hold.
RSM said it had received and was considering several comments from Lendy investors and noted the Lendy Action Group will be representing the interests of investors as part of the court application.
“The application to court for directions will be a significant undertaking as we will be required to explain the full trading history of Lendy, the contractual relationship between the parties, the difference between Model 1 and Model 2, the structure of the documentation and the issues which have been raised,” RSM said.
“We therefore anticipate that the costs to the estate in respect of the application will be considerable.”
It comes as the Lendy Action Group passed its £25,000 target to take legal action against the distribution method and is now seeking £75,000.