Lending Club bankruptcy remote vehicle

[DanB]

Isn't it possible a BRV would jeopardize the fat cats' stakes in Lending Club?  I can almost guarantee the companies that sank millions into Lending Club didn't do so under an agreement that made their piece of the pie junior to outstanding notes.  In effect, they used our notes to guarantee that cigar smoking yacht party-goers would not lose money.  A BRV would take that away, because the buffer of several $billion would disappear.

Absolutely. That's pretty much what it would & should do.  These companies & deep pocket individuals may have sunk millions, but their potential reward as "owners" are enormous (as the IPO will demonstrate). When this first started there was no precedent though as to what a standard deal was. Making it up as they went along was not that far from reality.  I for one have no problem revisiting the quaint notion that the balance of risk & reward should be tilted so much in favor of them & not a bit more equally.

What are we asking for here? Something special? No. a BRV (similar to the one Prosper offers) gives us no more than what institutional lenders  get & no more than lenders who invest through companies like Peter's fund for the accredited already get.

[Jon]

I'm not an owner.  I just figure that the population of borrows in 26 states is less than the population of 50 states and as such, there would be a larger pool of borrows if operations are permitted in 50 states.

I haven't been reading the writings of people who have vested interests in the success of the company. 

I have funded several hundred notes on the platform so I do have a vested interest in the success of the company.  I don't really care about the IPO.

I am wondering if I should take exception to your tone, but I'm not going to make a decision on that for now.

The other side of that is that I'm wondering if I have anything to contribute to this thread, or this forum; maybe I should just return to read-only mode as my questions might be received as suspect.

If this is about lender participation, then I did lose the plot and I'm righted.   If this is about borrower participation, than my question is answered.


-Jon

[core]

I just figure that the population of borrows in 26 states is less than the population of 50 states and as such, there would be a larger pool of borrows if operations are permitted in 50 states.

I was not aware that the blue sky exemption was in any way applied to borrowers.  I thought it only applied to investors.  Something which LC certainly does not need right now.  I believe that was also what DanB was getting at.  If anyone has information to the contrary, I would certainly welcome hearing it.

I am wondering if I should take exception to your tone, but I'm not going to make a decision on that for now.

The other side of that is that I'm wondering if I have anything to contribute to this thread, or this forum; maybe I should just return to read-only mode as my questions might be received as suspect.

It is all in good fun.  If you're going to be anywhere near finance you had better have thicker skin than that.  I'd rather take my mother into a locker room than a bond trading pit.

Absolutely. That's pretty much what it would & should do. 

And that is "absolutely" why it will never happen.  They have it almost sealed up just the way they want it.  Absolute best case, they will announce that they are "looking into it".  Then the cheerleader journos will post blog entries saying "Lending Club to form BRV; stay tuned for details".  The IPO happens, and that is the last you will ever hear of it.  There is virtually nothing to accomplish here at this late date.  Aside from knocking them a new one before the IPO, that is, which I am all for.

[Jon]

Thanks, core.

-Jon

[Fred93]

perhaps i am understanding this incorrectly. how does creating a bankruptcy remote vehicle jeopardize their blue sky exemption? from reading above, i thought such an exemption is dependent on being public. unless the creation of a brv jeopardizes their ipo, the two are unrelated.

I'm thinking that it is because the BRV is a separate company.  The BRV is not a public company, and therefore doesn't have the exemption.

[hoggy1]

perhaps i am understanding this incorrectly. how does creating a bankruptcy remote vehicle jeopardize their blue sky exemption? from reading above, i thought such an exemption is dependent on being public. unless the creation of a brv jeopardizes their ipo, the two are unrelated.

I'm thinking that it is because the BRV is a separate company.  The BRV is not a public company, and therefore doesn't have the exemption.

That might be Fred, but the BRV is not buying or selling securities. It is just an escrow agent.

[rawraw]

Thanks, core.

-Jon

Some people are the best with interacting with others and making them feel welcomed.  Luckily, the ones who are like that actually contribute value -- which is often not the case on internet forums.  Don't let them discourage you from participating, as it's a very small amount of posters.  You can actually choose to block certain posters from appearing on this forum, if you are so inclined.

I understand your argument of more borrowers, means more revenue, means lower credit risk from LC.  That may be true in normal times, not so sure about in stressed times.  And especially not true as LC engages in these blackbox loan programs, which we don't know the extent of risk they are adding to their credit.

[Jon]

Thanks, core.

-Jon

Some people are the best with interacting with others and making them feel welcomed.  Luckily, the ones who are like that actually contribute value -- which is often not the case on internet forums.  Don't let them discourage you from participating, as it's a very small amount of posters.  You can actually choose to block certain posters from appearing on this forum, if you are so inclined.

I understand your argument of more borrowers, means more revenue, means lower credit risk from LC.  That may be true in normal times, not so sure about in stressed times.  And especially not true as LC engages in these blackbox loan programs, which we don't know the extent of risk they are adding to their credit.

Thanks, rawraw.  Can you explain what you mean by "normal times" and "stressed times?"

To me, "normal times" is a 10 year US treasury yield above 3-4%. 

I have no doubt that our individual investor risks are increased with blackbox loan programs and all other undisclosed dealings that could turn us all into unsecured creditors, but I'm not concerned enough to take any action beyond prudent diversification.


-Jon

[rawraw]

Interest rates can be indication, but I'm talking about stressed times which would involve increasing defaults and reduced demand by banks for additional credit as they tighten. Lending Club is really dependent on origination fee income, which can disappear if demand takes a dive due to the low in a credit cycle.

[Jon]

Thanks, rawraw!

-Jon

[Fred93]

perhaps i am understanding this incorrectly. how does creating a bankruptcy remote vehicle jeopardize their blue sky exemption? from reading above, i thought such an exemption is dependent on being public. unless the creation of a brv jeopardizes their ipo, the two are unrelated.

I'm thinking that it is because the BRV is a separate company.  The BRV is not a public company, and therefore doesn't have the exemption.

That might be Fred, but the BRV is not buying or selling securities. It is just an escrow agent.

I'm not a lawyer, but I don't think your interpretation is quite right.  The BRV has to actually  "own" the loans.  Its not just an escrow agent.  An escrow agent simply takes custody temporarily of things owned by others.

Beyond that, attempting to use logic to understand the legal situation would be speculative.  I don't have the energy to find the laws in question, read them, etc.

[toiletpaper55]

perhaps i am understanding this incorrectly. how does creating a bankruptcy remote vehicle jeopardize their blue sky exemption? from reading above, i thought such an exemption is dependent on being public. unless the creation of a brv jeopardizes their ipo, the two are unrelated.

I'm thinking that it is because the BRV is a separate company.  The BRV is not a public company, and therefore doesn't have the exemption.

That might be Fred, but the BRV is not buying or selling securities. It is just an escrow agent.

I'm not a lawyer, but I don't think your interpretation is quite right.  The BRV has to actually  "own" the loans.  Its not just an escrow agent.  An escrow agent simply takes custody temporarily of things owned by others.

Beyond that, attempting to use logic to understand the legal situation would be speculative.  I don't have the energy to find the laws in question, read them, etc.

my bad; i also wasn't aware that the blue sky exemption applies to BORROWERS. this makes more sense.

and yes, the BRV should technically own the loans in a separate entity and the institutions either own an equity stake in the vehicle or have notes back by the assets within..

[Gatsby]

So what happens if Prosper/LC files for bankruptcy? Who do we contact?

[dompazz]

So what happens if Prosper/LC files for bankruptcy? Who do we contact?

In order:
1. Your wife/significant other, "honey remember that money I was investing..."
2. Your local bartender.
3. If your investment is large enough, an attorney specializing in bankruptcy claims and securities law.
    3.1 If not, wait until the dust settles and a lawyer contacts you either for the bankruptcy settlement or the class action lawsuit, or both.
4. Repeat #2 as necessary.

[fliphusker]

So what happens if Prosper/LC files for bankruptcy? Who do we contact?

In order:
1. Your wife/significant other, "honey remember that money I was investing..."
2. Your local bartender.
3. If your investment is large enough, an attorney specializing in bankruptcy claims and securities law.
    3.1 If not, wait until the dust settles and a lawyer contacts you either for the bankruptcy settlement or the class action lawsuit, or both.
4. Repeat #2 as necessary.

Think you actually might go with 2 ahead of 1.  Might hurt less when she is beating you with a higher blood alcohol level.