P2p Global Investments Share Discussion Threads

[davebowler] 31/7/2018 09:29

Liberum;
Event

P2P GI's NAV per share at 30 June 2018 was 956.2p, representing a total return of -0.14% in the month (IFRS 9 basis). The result for the month has been significantly impacted by the previously announced write down of the £5.5m URICA Limited equity position following the business being placed into provisional liquidation on 20th July 2018. Share buybacks during the month contributed 0.09% to the NAV return. YTD June 2018 NAV total return was 1.7%.

The adverse performance versus expectations has been driven by lower returns on the legacy assets with UK consumer driving the majority of the variance. The legacy portfolio continues to run off and was down to 30% in June 2018 (48% in December 2017). The overall drag on the company’s profitability, whilst still material, is reducing month on month and the Manager continues to optimise performance through improving servicing and tactically disposing of loans where possible.

At the end of June, 70% of the portfolio was in continuing assets up from 52% at the end of 2017. This portfolio is delivering 9.2% net yield which is ahead of target. The continuing portfolio consists of SME loans 42%, real estate 45%, and consumer 13%. The majority of the consumer loan exposure is made up of structured loans where the originator has first loss equity ahead of the company's exposure and consists of UK, European, US and Australasian exposure.

The equity portfolio of £41m consists of 14 positions. Many of the positions are in small and early stage businesses and the Manager would expect some volatility through the investment period.

Liberum view

While the portfolio of continuing assets performs well ahead of target, the legacy portfolio continues to be a drag on the overall performance with returns significantly below target. The Manager has accelerated the run-off and strong progress has been made in transitioning the portfolio to more attractive asset classes, reducing the exposure to the low yielding and volatile legacy assets.

P2P GI is trading at a -15.6% discount to NAV.

[lurker] 27/7/2018 10:50

Well where is the NAV (and dividend) announcement that was due yesterday?

[davebowler] 25/7/2018 09:55

Liberum;
Event

URICA Limited, a P2P Global Investments (the company) underlying investment which represented 0.74% of its May 2018 NAV (c. £5.5m carrying value) was placed into provisional liquidation on 20 July 2018. P2P Global Investments has concluded that its equity investment in URICA Limited should be written off.

P2P Global Investments has provided a revolving credit facility to URICA Europe Limited for which URICA Limited acts as servicer. The outstanding exposure is c£24.4m. URICA Europe Limited has not been placed into administration, and is not part of the URICA Limited group and its ownership of receivables is bankruptcy remote from the insolvency estate of URICA Limited. New funding under the revolving credit facility has been restricted and the company is working with key contacts within URICA Limited and other counterparties to ensure that the receivables owned by URICA Europe Limited continue to be serviced and managed effectively. The receivables are short term in nature and also benefit from credit insurance.

Liberum view

P2P Global Investments' last published NAV per share was 957.57p as at 31 May 2018 (incl. IFRS 9). The carrying value of URICA Limited represented 7.1p per share (or 0.74% of NAV). P2P Global Investments will publish its monthly NAV for June 2018 on or around 26 July 2018. The 0.74% impairment is the total impairment being made at this time as a result of the liquidation.

P2P Global Investments is trading at -13.3% discount to NAV, compared to a peer group average discount of -3.2%.

[davebowler] 04/5/2018 10:01

Liberum
P2P Global Investments (Mkt Cap £622m)

Low cost of debt on new securitisation

Event

Further to last week's announcement, P2P Global Investments has completed the securitisation of a portfolio of UK SME loans originated by Funding Circle.

The senior tranche represented 62% of the overall structure and was awarded a Aa3 rating by Moody's. The spread on the senior tranche was 75bps. Investors in the securitisation included the European Investment Fund (part of the European Investment Bank) and KfW, the German development bank.

The transaction is backed by 4,007 loans with a total remaining balance of £206.6m (original balance £255.6m). The weighted average interest rate on the portfolio is 10.0% and the average remaining balance is £52k. The weighted average seasoning of the loans is 8.6 months and the average remaining term is 44.7 months.

Liberum view

The weighted average spread on the overall securitisation has not been revealed yet but it should help to lower P2PGI's cost of funding (1.9% average spread at 31 December 2017). In addition, it broadens the company's sources of funding. The shares currently trade on a -17.3% discount to NAV.

Specialist Finance

[aroon001] 27/4/2018 15:59

Hi Yieldsearch thanks for that background. I'm still not sure I follow how it works. What you are describing is say P2P buying £10m of 10% yielding loans, and then raising finance (borrowing money) @ 4% from somewhere to fund £9.5m of the assets. So leveraging themselves up 20x.

But a securitisation is where you package and sell the loans on to other investors, who in return get the income from the 10% yielding assets? So who will actually own the £10m of loans in this case (and were they already on p2p books), who is borrowing the funds at libor + x and from where, what does it mean when it says P2P will retain 5% of the structure?

[yieldsearch] 27/4/2018 13:39

never a daft question, and hope that my answer is making sense:
basically providing high leverage. say you have a pool of loans yielding 10%. Issuance of securitisation (for 95% of the loan) is costing 4% ( libor +some margin.. i dont have the figures). So the 95 is costing 4% (3.8), the assets (100) is generating 10 (10pc of 100), leaving 6.2 for the holder of 5% (10-3.8=6.2). So the retention holder could have an asset (5) generating 6.2 per year (much larger running yield than the original 10pc).
Above very approximate and just one dummy example, not linked to the above real life securitisation, please do not assume that they can make such a high return as you have to factor cost of issuance, margin on the securitisation and running costs etc..
the downside is that if the underlying pool has more than 5% losses, the p2p exposure could be wiped out (again not taking into account features protecting the 5%, such as provisionning of losses through interest margin etc..)

diversifying: as it is using the capital market, it is not using bank funding so could free up available bank line. but again i don't have the details

[aroon001] 27/4/2018 12:38

Daft question, could somebody explain how these securitisations work? if P2P is packaging loans (it already owns?) and sells them off to investors, how does this benefit P2P? What does it have to do with diversifying P2P's source of funding?

[davebowler] 27/4/2018 09:36

Liberum;
P2P Global Investments (Mkt Cap £619m)

Potential securitisation of Funding Circle loans

Event

Bloomberg reports indicate that P2P Global Investments is seeking to arrange a new securitisation backed by UK SME loans originated through the Funding Circle platform. This follows the company's securitisation of Zopa loans in Q4 2017.

The transaction is backed by 4,007 loans with a total remaining balance of £206.6m (original balance £255.6m). The weighted average interest rate on the portfolio is 10.0% and the average remaining balance is £52k. The weighted average seasoning of the loans is 8.6 months and the average remaining term is 44.7 months.

P2P GI would retain at least 5% of the structure in order to comply with risk retention requirements

Liberum view

Last year's Zopa transaction priced attractively with a weighted average cost of 1-month Libor +99bps and we would expect the proposed Funding Circle transaction will also help to diversify the source of funding and lower the company's existing cost of debt. UK SME loans accounted for 9.2% of NAV in February. The fund continues to reposition the portfolio and is targeting a covered 15p quarterly dividend by the end of Q2 2018 (implied 7.5% dividend yield). The shares currently trade on a 16.6% discount to NAV.

[aroon001] 06/3/2018 00:38

This stock is turning into a disaster. Nav is now hit a new low of 950 pence odd. And shares still trade at almost 20% discount to nav.

[davebowler] 23/1/2018 10:56

P2P is one of Winterfloods picks -see pie chart;

[davebowler] 12/1/2018 15:40

Winterfloods view-
Backing a P2P turnaround
P2P Global Investments (P2P) had a tough 2017. It fell from a significant premium to NAV to a 16% discount on the back of concerns relating to some of its loans and expensive fees. Although recent performance has been disappointing, the Winterflood team initiated a notional position in the fund because they believe a turnaround is under way. Last year the portfolio was repositioned, with exposure to US and UK credit significantly reduced.

‘While it is still not particularly cheap, the fund’s fee structure has also been amended,’ Winterflood said.

‘Taking all this into account, and with its shares trading at a 16% discount to NAV and offering a prospective yield of 7.3%, we think that the fund now represents one of the debt sector’s more compelling value opportunities.’

[davebowler] 30/11/2017 09:48

Liberum;
Strategy update

Event
P2P Global Investments' strategy update presentation highlights that the manager expects to cover a dividend of at least 15p per quarter by the end of Q2 2018. The quarterly dividend will be at least 12p per share in the intervening period.

The company has recently accelerated the portfolio repositioning with the sale of a portion of its US consumer exposure. The transaction represented a reduction in company's net exposure to US consumer loans of £37m (4.6% of NAV). Gross exposure decreased by £167m with a consequent reduction in leverage and hedging requirements. The portfolio sale was the main reason for the -1.0% NAV decline during October.

Two-thirds of the credit assets are now at or exceeding return targets. The company intends to increase its exposure to specialist and secured assets and has £400m pipeline of new investments with existing and new partners. Secured assets are expected to be 39% by Q2 2018 vs. 25% currently.

[thompson_alan] 27/10/2017 20:21

P2P Global Investments (P2P)

Numis Securities believes there could be a pick-up in P2P Global Investments’ sorry share price. The largest of the listed funds in the direct lending sub-sector, P2P lost investors’ confidence when currency hedging costs and rising delinquencies on its high US consumer exposure meant it failed to hit its annual return target of 6-8%.

Earlier this year, its manager merged with Pollen Capital, the manager of its more successful and UK-focused rival Honeycomb (HONY).

With the discount on the shares having widened to 22% - giving it a Z-score of 1.1% - and a strategy update expected early next month, Numis analyst Sam Murphy is cautiously optimistic, writing this week that:

‘We now see only modest downside, with the potential for the discount to narrow if returns start to pick-up or if the November strategy update provides an improved outlook. The fund is paying quarterly dividends at a rate of 12p, equivalent to 48p pa and a 6.1% yield on the current share price. We expect that over time P2P’s portfolio will look a lot more like Honeycomb IT, which is also managed by Pollen Street.

‘This raises potential for a merger in future, in our view, and it is notable that Invesco Asset Management is the largest shareholder in both funds,’ he said.

[riverman77] 26/10/2017 08:57

Yes the current portfolio is clearly full of junk but the new managers brought in seem to have expertise in this area and the Honeycomb trust has performed well. It's just a question of how long it will take to reposition the fund, given its size I suspect quite a long time.

[aroon001] 26/10/2017 00:29

So 0.14% return on the month, which is like 1.5% return per annum without buybacks.
Comparable to a regular high interest savings account, but exposed to more credit risk and leverage, and paying a performance fee on top.

They really need to wind this down and return funds to investors. Ideally before the next recession.

[davebowler] 25/10/2017 14:15

Liberum;

Event
NAV per share at 30 September was 1002.2p which represents an increase of 0.19% in the month of which share buybacks added 0.05%. NAV return in Q3 was 0.77% and in 2017 to date is 3.1%.

Exposure to US consumer loans has reduced to 34% of NAV (June 2017: 39%). Hurricanes in the quarter impacted the US portfolio by increasing delinquencies in affected states such as Texas and Florida.

The corporate debt facility has increased from £150m to £200m as the company is seeking to move away from US Dollar financing. P2P GI is also seeking to arrange a securitisation of Zopa loans which should help to reduce the cost of funding. The transaction is backed by 31,153 Zopa loans with a total outstanding balance of £209m, which represents the majority of the company's existing UK consumer loan exposure (20% of NAV at 30 September 2017)

An unchanged dividend of 12p has been declared for Q3. 5.7p of this was covered by income and 6.3p is from the special distributable reserve of which 2.1p relates to share buybacks.

Liberum view
P2PGI's returns remain subdued (12-month NAV return of 3.7%) which has led to the discount widening to -21% in recent months. In terms of credit performance, the 6-month rolling annualised impairment rate has declined slightly in the quarter but remains high at c.4.5%. The focus will now shift to the strategy update which is due in early November as investors seek clarity on how the portfolio will change over the next 12-18 months.

[lurker] 25/10/2017 09:44

OK-questions answered by today's company announcements...all looks on track to maintain the dividend plans

[davebowler] 24/10/2017 13:35

...............we would expect the proposed transaction will also help to reduce the company's existing cost of debt.........

[lurker] 24/10/2017 13:33

Does anybody know when the next dividend is likely to be declared, and also when the next monthly update posted?

[aroon001] 18/10/2017 23:36

So P2P global is packaging up a group of loans that us shareholders are currently receiving income from, and sells them on to other investors (whilst retaining a small portion). How does that benefit current shareholders as surely P2P now has to find other assets to invest in, and what does it mean reduces P2P costs of funding?

[davebowler] 18/10/2017 13:35

Liberum;
P2P Global Investments (Mkt Cap £634m)
Potential securitisation of Zopa loans

Event
Trade press reports indicate that P2P Global Investments is arranging a new securitisation backed by Zopa loans. This would be the company's second securitisation of Zopa loans following a similar transaction last year.

The transaction is backed by 31,153 Zopa loans with a total outstanding balance of £209m, which represents the majority of the company's existing UK consumer loan exposure (20% of NAV at 31 August 2017). The average balance of the loans is £6,708. The weighted average age of the loans is 4.5 months and the average remaining term is 45.7 months. The average interest rate is 7.2%.

According to a Moody’s report 88% of borrowers are in full time employment and the loans are mainly used to finance cars (30.8%), debt consolidation (38.0%) and home improvements (20.9%). The securitisation is called Marketplace Originated Consumer Assets 2017-1. Moody's main model assumptions are 7.0% lifetime defaults with 10% recoveries. The most senior tranche has been given a provisional rating of Aa3.

P2P GI would hold at least 5% of the structure in order to comply with risk retention requirements.

Liberum view
Last year's transaction priced attractively with a weighted average cost of 1-month Libor +168bps and we would expect the proposed transaction will also help to reduce the company's existing cost of debt. It would also release a significant amount of capital back to the company as it continues to reposition the portfolio towards specialist assets. The shares currently trade on a 22.5% discount to NAV.

[aroon001] 05/9/2017 23:03

And why is the share price tanking? the monthly nav was ok even if it is partly due to buy backs. anything we missing?

[lurker] 01/9/2017 10:43

Can anybody explain why the two very large trades (looking like a rollover at 830??) from the end of the day yesterday, do not appear in either today's or yesterdays total volume figures?

[davebowler] 31/8/2017 13:41

Liberum
P2P Global Investments has published its Interim Results for the half year to 30 June 2017, NAV growth was 2.3% over the period; stripping out the impact of share buybacks we calculate NAV return of c.1.8%. The company bought back a total of 2.6m shares during the period at an average price 824.25p; this provided an uplift of 5.6p per share. 24p of dividends have been declared and paid during H1.

The allocation to US consumer loans has reduced over the half year to 39% (December 2016: 55%). This capital has been predominantly reinvested in UK assets across real estate, consumer and SME loans. The main platforms for new origination in the quarter were Zopa (35%; UK consumer), Zorin (28%; UK real estate) and Funding Circle (20%; UK SME).



In terms of credit performance, the aggregate 6-month rolling annualised impairment rate declined marginally in Q2, but remains within the 4.5%-5.0% range. Borrowing margins improved in Q2 to 245 bps (previously 260 bps); as at 30 June the gearing ratio had declined to 72% (December 2016: 82%). The increase in USD Libor has offset the reduced margins but the company's lower US exposure will reduce the US Dollar funding requirement.

In line with changes require by IFRS 9, P2P Global Investments will make provisions for expected future credit losses from January 2018 onwards. It should result in a smoother NAV performance but there will be a larger one-off adjustment in the early months of the adoption of the standard.

Liberum View
A key development during the half year was the implementation of the strategic review of the investment management arrangements and proposals to re-orientate the portfolio away from the US consumer and towards higher quality platforms; the company has advised that this transition could take up to 18 months to achieve. Immediately preceding the announcement of the review the shares were trading at a 22.7% discount to NAV, which subsequently narrowed to c.13%.

The shares are currently trading at a 16% discount to NAV, compared to a peer group average discount of 2.6% for the direct lending peer group; the current yield is 5.4%. Underlying performance has gradually improved in 2017 and the fund will need to maintain this progression in order to achieve the targeted 6-8% return level and a re-rating towards par.