Questions raised over FundingSecure valuations as it approaches administration anniversary
FundingSecure is approaching its sixth month in administration, but the latest update from its administrator suggests there won’t be much good news for investors and creditors.
CG & Co was appointed as administrator for the P2P pawnbroking platform in October 2019 and its early findings a month later showed discrepancies in its client money account and little indication of how much investors could get back.
A creditors’ committee has since been set up and the latest update from the administrator on the FundingSecure website this month revealed that plenty of questions remain unanswered – particularly over valuations.
Valuations
There may be discrepancies between loan valuations and what some of the property developments are actually worth, the update suggests.
This may lead to legal action against valuers.
“The administrators are pulling together evidence to see whether there are valid and viable claims against valuers for flawed advice,” CG & Co said.
“They are taking advice from specialist professional negligence solicitors in relation to this.
“The creditors’ committee are being consulted and involved in this process.
“It is important that the administrators do not rely on potentially flawed valuations as a method of collection as in some instances there may have been contributory negligence by the company which could dilute a recovery.”
CG & Co said FundingSecure instructed valuers verbally but did not always instruct the basis of the valuation in writing.
“There are a number of instances where valuations were provided on the basis of a completed development, or gross development value (GDV), as well as the current value of the collateral itself,” it said.
“It appears that the GDV was used as a yardstick for expressing a view on loan to value.
“Where the administrators have reason to believe that original valuations were incorrect, they will engage chartered surveyors to provide a retrospective valuation, in addition to the current valuation in order that a loss can be quantified.”
Read more: FundingSecure: Are you a creditor or an investor?
Recoveries
CG & Co said it has appointed receivers to take over and manage a number of properties, while in some cases borrowers are being allowed to find third party finance to fund a project to completion.
Some borrowers are themselves in an insolvency process where the borrower company is in administration. This is managed separately by different administrators.
Similarly, there are some borrowers who are being managed by receivers appointed by FundingSecure before it collapsed.
CG & Co said it was reviewing their actions and requesting updates.
Wind-down plans
All Financial Conduct Authority-regulated firms are supposed to have a wind-down plan, which should technically keep it operating and make funds remain available for investors.
FundingSecure did have one but the administrator has said it was designed to allow the firm to wind down solvently so it is not relevant in an insolvency situation.
Non-disclosure agreements
Investors and creditors have been asking why members of the creditors’ committee have signed non-disclosure agreements (NDAs).
CG & Co said this was to stop information entering the public domain.
“Investors should note that the provision of certain information around issues encountered or around strategy could prejudice the progress of the administration if it was to enter into the public domain and so the administrators have to control the flow of information insofar as possible,” it said.
The administrator said meetings are minuted but there is no requirement to share these widely although it has previously released a redacted version of its first committee meeting.
