Chris Macklin from Assetz Capital Explains how P2P Lender Managed the Platform Loan Book During COVID-19 Pandemic

Chris Macklin, Chief Risk Officer at Assetz Capital, a peer-to-peer lender that originates secured loans, has provided a loan book update.

As noted in a blog post by Assetz Capital, Macklin explained how the platform managed the loan book during the COVID-19 pandemic and shared an update on the forbearance measures that have been taken in order to support platform borrowers and also to help safeguard investments.

As confirmed by the Assetz Capital team:

“In April last year, after seeking feedback from our lenders, we put in place measures to offer forbearance to our borrowers, to help support them through the difficult times ahead. This involved reaching out to them to provide the option of deferring repayments and interest for an initial period of three to six months, which was then extended for those who required additional support.”

The Assetz Capital team further noted that even though there were regional restrictions in the run up to Christmas last year and the national lockdowns, they’ve seen “a substantial reduction in the number of borrowers requiring forbearance, especially property developers.”

Assetz Capital added that it remains a challenging time for borrowers in certain sectors like non-food retail, leisure and hospitality and the company continues to work cooperatively with them to figure out the challenges they are dealing with while offering ongoing forbearance where they are able to make such accommodations.

Assetz Capital further noted:

“As a property-secured lender, it’s worth highlighting that our loan book is weighted towards property-backed development loans, which make up around 50% of our total value of the current loan book. The biggest impact on the development side of the business was felt early on during the first lockdown. Back in March 2020, there was a great deal of uncertainty which resulted in closed sites, disruption to supplies and delays with planning – so we inevitably had some borrowers asking us for support during that time. Following that initial period however, through Government support packages, and strong borrower management and resolve, we’ve seen the vast majority of sites reopen, with sales of properties continuing at a good pace in spite of the ongoing economic downturn.”

Assetz Capital also mentioned that their exposure to the “most affected” city-centre locations is fairly modest as well. Their focus has usually been the suburbs of cities and further afield, with about 88% of housing that they fund based outside London and the South East, the company confirmed. They also noted that this regional focus outside of city centres has “given relative strength to the overall loan book performance.”

Assetz Capital added that out of the remaining trading customers (Commercial/Buy To Let/Bridging), there was, at first, a fairly high proportion of borrowers who required or wanted forbearance during Q2 2020, which then “continued into further support in the quarter beyond that.” As restrictions began to ease in the later part of 2020 many were “able to contribute more and meet some of their interest and loan repayments,” Assetz Capital revealed. The company also pointed out that the “outlook for borrowers in the most affected sectors, which represents a relatively low proportion of the book, is still uncertain and we are working with them closely to offer bespoke arrangements where they are needed to support them through these challenging times.”

Assetz Capital added:

“We have seen unprecedented levels of Government support during this period which has lessened the impact on many of our borrowers. The introduction of the Coronavirus Business Interruption Loan Scheme (CBILS) has meant that we have been able to fund the remaining tranches of existing development loans where eligible and have been able to provide new loans to borrowers in need of finance throughout this difficult period.” 

Other UK government initiatives like the furlough scheme and business support grants/loans have also “helped to ease some of the problems faced by borrowers and have enabled many of them to assess their businesses and restructure accordingly,” Assetz Capital confirmed.

They also mentioned that on the development side, sales are “going through at a steady rate, which has been facilitated in some part by the reduction in stamp duty for homebuyers.” The market remains “very buoyant” with the number of mortgage approvals for property purchases in the United Kingdom at their “highest level since August 2007. (Source: Bank of England).”

Assetz Capital continued:

“As well as the Government schemes, we have been working with borrowers who require further support by putting solutions in place that do not increase the risk profile of the loan above a sensible level and don’t increase the chance of the borrower failing through taking on too much debt or impacting on their ability to repay the loan. We also take a view on the long-term viability of the borrower, using our experience and what is happening in the market, so that we can determine the strategy we want to employ for that particular loan. As part of this process, we put solutions to lenders via a lender vote.”

When making investments in P2P loans, there’s always a balance of risk vs reward and even though the supportive measures are placed for borrowers, there’s always a risk that certain loans will fall into the recoveries process which is why there’s risk of capital loss, Assetz Capital noted.

The company claims that the difference between Assetz Capital and various other peer-to-peer platforms is that they’re a property-secured lender, so they take “tangible” security assets on every loan. Assetz Capital also mentioned that if a particular loan doesn’t become distressed, it is the job or responsibility of their Portfolio Management and Recoveries teams to “maximize recoveries, minimize losses and achieve the best outcome for our lenders.”

(Note: for more details check here.)

Assetz Capital concluded in its update, dated February 17, 2021:

“Whilst there are still uncertain times ahead, the roll out of the vaccine means that there is hope for getting this pandemic under control. …. we will continue to offer support to our borrowers where it is needed and involve you, our lenders, on the steps that we take.”

The lender also confirmed that they’re constantly reviewing their credit appetite and are getting closer to “restarting new lending” outside of CBILS, through the Manual Lending Account (MLA) and Access Accounts. This will be done so that Assetz Capital is in a position to “support even more good credit-worthy businesses for you to invest in as we come out of this turbulent economic cycle.”

Assetz Capital was launched after the Financial Crisis of 2008, and was “born out of the need to offer finance solutions to those businesses that couldn’t access funds from the high street banks,” the company confirmed. They added that this ethos is “still at the core” of what they do, and it’s their intention to keep supporting UK businesses when they “need it most,” while also providing their lenders with “a fair return on their capital investments.”

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