Lendy administrator RSM is set to produce a fee proposal that it will share with the Lendy Action Group (LAG), after losing its court case against the collapsed peer-to-peer lending platform’s investors.
Last month, the LAG won its case against RSM, with the judge ruling for model 2 (M2) investors to be given priority in distribution payments over model 1 (M1) investors.
M1 investors are defined as creditors, meaning their eventual payouts will be pooled with other creditors, including the Lendy directors, while M2 lenders are defined as investors, which means that they may be able to recover funds directly from the loans that they helped to fund.
In an investor update, RSM noted the court’s ruling that M2 loan realisations fall outside of the
Lendy estate and are held by the platform solely for the benefit of the M2 investors.
However, it said that the final amount of M2 loan realisations is not yet certain because the costs which Lendy incurred in collecting and realising these funds still needs to be agreed.
RSM said it is currently reviewing the current and historic cost structure of the platform with the Lendy team and advisers in light of the judgement. As part of this review, RSM will consider how the costs of M2 loans will be met in line with the court’s direction and with the interests of Lendy’s creditors in mind.
After completing the analysis, RSM said it intends to produce a fee proposal which will be shared and discussed with the LAG and the conflict administrators of Saving Stream Security Holding Limited (SSHL), a legal entity of Lendy that was responsible for enforcing security on behalf of lenders under instruction from the platform.
RSM said it is likely it will also consult with the City regulator and Lendy’s creditors committee on the fee proposal.
There are three categories of costs which the fee proposal will consider: direct costs and expenses of the M2 loans; costs of realising the M2 loans that cannot be directly attributed to a particular M2 loan, for example, general staffing costs; and the costs of the Lendy administration, such as general enforcement and recovery costs, and investor correspondence.
“The joint administrators have previously paid interim distributions on the majority of loans that have been realised and funds remain held in the client account in respect of loans that have not yet been distributed,” RSM said in the investor update.
“Please note, no further distributions will be processed until a cost structure has been agreed regarding the Model 2 loans.”
After losing the court case last month, RSM said that it would follow the judge’s instructions regarding investor payments but warned that further court direction may be needed relating to the distribution of funds from the collapsed platform.