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Prosper Discussion => General Prosper Discussion => Topic started by: Peter on December 29, 2012, 09:14:04 AM

Title: Prosper Funding LLC Approved by the SEC
Post by: Peter on December 29, 2012, 09:14:04 AM
There was some good news from Prosper this week - their S-1 filing for Prosper Funding LLC was finally approved. This means that all investor notes will now be protected in the event of a Prosper bankruptcy. This is what some of the big investors have been waiting for so let's see if they start investing again.

You can read the details here on the SEC website:
http://www.sec.gov/cgi-bin/browse-edgar?company=prosper+funding&match=&CIK=&filenum=&State=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany

If you don't know what Prosper Funding LLC is all about then read this post from a few months ago:
http://www.lendacademy.com/prosper-announces-the-creation-of-bankruptcy-remote-entity/

I will have more about this on the blog next week but wanted to let you all know here first.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: investforfreedom on December 29, 2012, 12:00:59 PM
Thanks for keeping us posted on this, Peter.  This is a significant development.  It will also put some pressure on LC to implement similar measures to protect the smaller investors, not just those with deep pockets.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: priuspilot on December 29, 2012, 12:24:09 PM
Nice! I'm gonna go transfer some money there to celebrate
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: berniemadeoff on December 29, 2012, 03:03:09 PM
I'm no lawyer but I think the interesting stuff is here...




Security interest—ranking
    
The Notes will not be contractually senior or contractually subordinated to other indebtedness, if any, that Prosper Funding incurs.  All Notes will be special, limited obligations of Prosper Funding.  Prosper Funding was formed by PMI so that, in the event of PMI’s bankruptcy, the borrower loans that Prosper Funding owns should be shielded from claims by PMI’s creditors, thereby protecting the interests of Note holders in those borrower loans and the proceeds thereof.  This is achieved by placing certain restrictions on Prosper Funding’s activities, including restrictions in Prosper Funding’s organizational documents on its ability to incur additional indebtedness, and by implementing certain formalities designed to expressly reinforce its status as a distinct corporate entity from PMI. Nevertheless, the Notes themselves do not restrict Prosper Funding’s incurrence of other indebtedness or the grant or imposition of liens or security interests on Prosper Funding’s assets, and holders of the Notes do not themselves have a direct security interest in the corresponding borrower loan or the proceeds of that loan.  Accordingly, in the event of a bankruptcy or similar proceeding of Prosper Funding, the relative rights of a holder of a Note may be uncertain. To further limit the risk of Prosper Funding’s insolvency, Prosper Funding has therefore granted the indenture trustee, for the benefit of the Note holders, a security interest in the borrower loans, the payments and proceeds that Prosper Funding receives on the borrower loans, the bank account in which the borrower loan payments are deposited and the FBO account.  The indenture trustee may exercise its legal rights to the collateral only if an event of default has occurred under the Amended and Restated Borrower Payment Dependent Notes Indenture for the Notes (the “indenture”), which would include Prosper Funding’s becoming subject to a bankruptcy or similar proceeding.  Only the indenture trustee, not the holders of the Notes, has a security interest in the above collateral.  If the indenture trustee were to exercise its legal rights to the collateral, the indenture provides that amounts collected on a particular borrower loan (minus allowable fees and expenses) are to be applied to amounts due and owing on the corresponding Note.  There can be no assurance, however, that the indenture trustee, or ultimately the Note holders, would realize any amounts from the collateral.  See “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes” for more information.


(https://forum.lendacademy.com/proxy.php?request=http%3A%2F%2Fwww.sec.gov%2FArchives%2Fedgar%2Fdata%2F1416265%2F000114036112052353%2Fchart.jpg&hash=889667699673c5d66cdb4b61ceab464e)

Does this new structure apply to loans issued starting now? Anybody know?
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: hippo387 on December 29, 2012, 07:10:13 PM
I think this is a game changer (as long as it wasn't done with the expectation of a PMI bankruptcy, but I highly doubt it would've been approved if that were the case). The biggest risk to investing via Prosper was not the notes themselves, it was the stability of the platform. This structure provides greatly increased stability and reassurance to investors. I will be increasing my investment (which is currently $70K+) in 2013.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: nonattender on December 29, 2012, 08:43:11 PM
Woo - hoo!

(Game on!)
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: mo on December 30, 2012, 05:03:56 PM
Does Lending Club have anything like this setup?  Last I read their prospectus one of the risks was them going bankrupt...
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: DanB on December 30, 2012, 05:30:02 PM
No, LC does not, but they should be reminded, badgered, hassled etc............ by all of us until they do.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: Dennis on December 30, 2012, 06:30:54 PM
This is a HUGE game changer for me.  If notes are protected, the biggest risk to investing in Prosper has been removed (IMHO).  I'll wait until an official release from Prosper and then it's off to the races with new $$ from me.  I hope they also get the software problem fixed very soon.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: Fiscal Sergeant on December 31, 2012, 02:40:39 PM
This is rather bad news.  Once again I have to race Worth Blanket for notes...
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: faeriering on December 31, 2012, 05:45:42 PM
so I sent a message to LC.  DanB thanks for reminding me that we have the power to take our issues to the source.  I keep forgetting to do that, and tend to bitch behind there backs.  A lesson I could definitely apply to my personal and business life.

The response I got back seemed to show that LC was really comfortable with their risk profile vs. Prosper's Risk Profile and that they didn't see any reason to mitigate that further.  They also said they are working on FoiloFN.

I agree that their financial situation is in a much better place than Prosper . . . Do other's see risks in LC going bankrupt and needing the kind of protection that Prosper achieves with this SEC approval?
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: Peter on December 31, 2012, 09:37:51 PM
While I have no inside information on this I would be very surprised if LC doesn't come up with some kind of bankruptcy remote structure in 2013. I expect they do not want a competitive disadvantage this big.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: DanB on December 31, 2012, 09:51:18 PM
I'd be surprised as well Peter. I think everyone agrees that LC is in a much stronger financial position than Prosper. I don't believe that to be the issue here though.

Just to recap for those who may not be aware:

The issue here is that Lending Club already has had such a vehicle in place for its institutional investors. Why? I'm guessing it wasn't just out of the goodness of their heart but rather because institutional investors have either demanded it or it has been determined that such a vehicle assuages the concerns of institutional investors by adding a "layer" of protection in the very unlikely event that a bk becomes an issue.
Ok, so fast forward to the present & Prosper has now apparently shown that such a vehicle can be put in place for individual/retail investors as well. So one would think that LC would be eager to extend that same layer of protection to us retail investors, regardless of whether they are "really comfortable with their risk profile vs. Prosper's Risk Profile" or not. To deny us that same level of protection, given all of the above is imo unconscionable & I'd encourage others who sees this as I do to remind them of this until they see it our way.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: priuspilot on January 01, 2013, 07:42:13 AM
The only reason I could LC not doing this for the retail investor is because 99% of their retail investors have no idea about this issue and therefor spending on the legal fees etc. to put it in place would not be cost effective for them.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: DanB on January 01, 2013, 03:39:25 PM
priuspilot............That is so true.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: mo on January 01, 2013, 04:32:30 PM
The issue here is that Lending Club already has had such a vehicle in place for its institutional investors.

I hadn't heard that before is there a place that explains the difference in LC treatment between institutional investors and smaller fish?  I also read that big investors wanted to be able to by whole loans for tax/accounting reasons does anyone know what those reasons are?
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: DanB on January 01, 2013, 05:07:16 PM
LC bk remote vehicle is set up through its wholly owned subsidiary LC Advisors which is the entity that is used only by its institutional investors to invest. Peter did a short piece on this sometime back.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: hippo387 on January 03, 2013, 11:36:04 AM
I can't be certain it's a result of Prosper Funding being approved, but I'm already seeing a significant uptick in institutional lending over the past couple days. There are still plenty of loans available for retail investors (although they are getting funded more quickly). This bodes well for Prosper.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: Peter on January 03, 2013, 04:16:39 PM
Prosper has had a good start to the month, the best I can remember and it may or may not be a coincidence. I am guessing not. Although still no movement from Worth-blanket2 or MI2.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: hippo387 on January 08, 2013, 12:09:48 PM
Peter -- should we expect an announcement from Prosper regarding Prosper Funding LLC?  My guess is they are busy with the start of 2013 and want to act strategically when rolling this out, but I would think they'd want their retail customers to know about this soon ...
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: Peter on January 08, 2013, 06:07:43 PM
Look for email from Prosper in your inbox tomorrow. And there will also be a blog post about it.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: hippo387 on January 08, 2013, 08:51:52 PM
Thanks Peter!  Keep up the good work, and just remember that for every "NoGoodDeed" commenter who hassles you, there are many more of us who rely on your site for timely and insightful information.  It is very much appreciated!
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: TRPeterson on January 09, 2013, 08:11:42 AM
Thanks Peter!  Keep up the good work, and just remember that for every "NoGoodDeed" commenter who hassles you, there are many more of us who rely on your site for timely and insightful information.  It is very much appreciated!

Ditto
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: berniemadeoff on January 09, 2013, 10:11:24 AM
Ditto 2

Thanks for keeping us updated, Peter.

Like you, I have not lost confidence in Prosper.  I think it's a good platform and I am pleased with my returns there. But they do need to get back to a positive trajectory on loan originations, or I think a lot of people (myself included) will start to head for the exit.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: Peter on January 10, 2013, 08:48:23 AM
Thanks Peter!  Keep up the good work, and just remember that for every "NoGoodDeed" commenter who hassles you, there are many more of us who rely on your site for timely and insightful information.  It is very much appreciated!

Thanks, I appreciate your kind words. I am not too bothered by NoGoodDeed and others. They come from the Prospers.org forum and have a hatred of Prosper that is truly quite staggering. They also have a vested interest in seeing Prosper fail.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: berniemadeoff on January 10, 2013, 10:08:39 AM
I read through that forum last week and almost slit my wrists it was so depressing.  Oddly, most of the people there have very little to loose or gain from Prosper's supposed demise.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: TRPeterson on January 10, 2013, 11:10:25 AM
I would assume most of that crew had a poor Prosper 1.0 experience... like most everyone who experienced Prosper 1.0... or have no understanding of balance in financial risks/returns and chose to invest heavily in E & HR loans even in Prosper 2.0 era thinking they'd achieve 30% ROI.

While I only put pocket change in Prosper 1.0 and lost most of it; I've learned not to view money / investments / financials using emotions as it really lends towards bad decisions.  Let equations, statistics and data trends make the decision for you.  I even did a post to practically poke fun at the money I lost in the early P2P days http://www.prospertoretire.com/88/i-lost-it-all-with-p2p-lending-but-then/

It's not like getting mad at Bank of America for charging me 12.99% on a credit card is going to net any benefit... it's just a business decision on their end and my end that either results in a transaction or doesn't result in a transaction.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: NoGoodDeed on January 17, 2013, 01:08:27 PM
Thanks Peter!  Keep up the good work, and just remember that for every "NoGoodDeed" commenter who hassles you, there are many more of us who rely on your site for timely and insightful information.  It is very much appreciated!

Thanks, I appreciate your kind words. I am not too bothered by NoGoodDeed and others. They come from the Prospers.org forum and have a hatred of Prosper that is truly quite staggering. They also have a vested interest in seeing Prosper fail.

I'm of the assumption that onlookers - especially participants here -  have the wherewithal to screen out the perceived irrational vitriol at prospers.org and find merit in what remains.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: DanB on January 17, 2013, 05:14:03 PM
I'm of the assumption that onlookers - especially participants here -  have the wherewithal to screen out the perceived irrational vitriol at prospers.org and find merit in what remains.
[/quote]

I'm pretty sure that could be said of almost any site on the internet. The question is who would want to go through all that silliness.

"Perceived" irrational vitriol?...........I'm guessing it's more than just a perception. More like part of the DNA over there  :)
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: Keltset on January 17, 2013, 05:27:12 PM
Quote
I'm pretty sure that could be said of almost any site on the internet. The question is who would want to go through all that silliness.

"Perceived" irrational vitriol?...........I'm guessing it's more than just a perception. More like part of the DNA over there  :)

LOL Just for kicks I tried to go over there to check it out and at the same time my CPU sent off an overheating alert and my comp shut down... Must be a sign... :)
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: Peter on January 17, 2013, 06:11:14 PM
Let me say one thing about Prospers.org. There are some very smart people over there and when I first started blogging here I learned a great deal about p2p lending from reading and participating on that forum. Over time I just found the negative tone to be tiresome and the attacks on differing opinions to be worrisome. I do still check in from time to time because, as I said, there are a lot of smart cookies on Prospers.org who still follow this industry very closely. And after wading through the negative vitriol one can still learn something.
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: NoGoodDeed on February 01, 2013, 01:49:42 PM
"Perceived" irrational vitriol?...........I'm guessing it's more than just a perception. More like part of the DNA over there  :)

Well speaking of DNA, Prosper has a new Board now (as everybody knows).
Complaints about how Prosper used to be run appears to have some justification.

Anywho...

Here's a little insight about how Prosper's lenders/supporters who literally sat elbow-to-elbow with Prosper CEO Chris Larsen turned so antagonistic.  Written by a prospers.org regular.
http://fred93blog.blogspot.com/2009/11/prospercom-paradise-lost-deadbeats-won.html

Nice conclusion there in view of recent changes:
Quote
If I were one of the VCs considering an investment, I'd be lookin' to replace Chris Larsen.

Written in 2009!  :o

We've gotten off-topic.  But I didn't bring up prospers.org.   :)
Title: Re: Prosper Funding LLC Approved by the SEC
Post by: DanB on February 01, 2013, 09:21:20 PM
NoGoodDeed..........Actually you did bring them up,................again!

I just want to know what all you people are going to do one day when the lawsuit etc. is all finished & done with. Will this crusade be over then?
Are you people planning on telling some other company how to run their business &/or who should be CEO or on their board? Because if you are thinking in that direction, I could give you a few names of companies that have pissed me off in the past & you guys can sink your teeth into them. I'll be glad to help, just let me know.