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Forbearance Vote Results and FAQs

Forbearance Vote Results and FAQs

Forbearance Vote Results:

 

Following a lender vote to provide forbearance to borrowers during these extraordinary times and to extend their loans for an initial three months, where needed, we are now able to share the results.

The vote closed at 9:00am on Monday 6th April 2020, and was overwhelmingly in favour of forbearance.

 

The detail of the vote:

 

Total votes cast = 4658

Total votes for forbearance = 4259 (91%)

Total votes against forbearance = 399 (9%)


Calculated by number of people voting

Excluding those who did not vote: For = 92%, Against = 8%

Including those who did not vote as ‘for’: For = 98.3%, Against = 1.7%


Calculated by vote and weighted by size of investment

Excluding those who did not vote: average of For = 91%, Against = 9%

Including those who did not vote as 'for’: average of For = 96%, Against = 4%

 

Please Note: the vote specifically stated that those that do not vote may be counted as a 'for’ vote


Frequently Asked Questions


Why did you ask lenders to vote?

We were seeking a blanket approval from Lenders to Assetz Capital’s proposals in response to requests from Borrowers for forbearance due to facing financial hardship given the lockdown across many sectors within the UK Economy in order to combat the Covid-19 pandemic.

We estimate that our Borrowers directly employ or have direct sub-contract relationships with 100,000 individuals. At this critical moment of the pandemic therefore, there is a significant part of the UK’s GDP dependent on Assetz Capital and you, their Lenders, treating them fairly and supportively, and standing by them until this terrible period has passed. The same expectation is placed on every lending institution throughout the United Kingdom and is led by the Government and the unprecedented levels of support they are proposing.


What is Assetz Capital’s proposal?

Lenders are advised that we already have a significant number of forbearance requests, particularly in Leisure where Pubs and Hotels have been ordered to close. In order to deal with those requests expediently we are presenting this blanket vote to every single Lender currently invested with Assetz Capital and will then proportionally apply those votes to each loan ensuring we know Lenders’ position on each of those too. This will avoid numerous votes hitting Inbox’s as occurred with the recent updates, although at that time we felt it important to present you with a holding communication.

Rather than offer complete carte blanche it is accepted Lenders will want to understand how we propose to treat Borrowers. You may, or may not, be aware that on many loans (but not all) we hold sums in Borrower retention accounts. These retentions are in varying amounts and are for a variety of purposes, including being able to contribute to Lender interest for a period, even if the Borrower is unable to meet those payments. We intend to deploy those funds where we can, and we therefore set out our proposals below.

 

For Developments, Bridging Loans and Residential Refurbishments:

  • We will offer all Borrowers an immediate 3 month time extension, where appropriate, to their facility (but reserve the right to extend this up to a maximum of 6), as given that sites are closed in Scotland and severely impacted in the rest of the UK, it is unlikely that developments can firstly be completed on time, and secondly, given many to most estate agents, valuers and even mortgage lending is closed, the constructed properties successfully sold on before the expiry of the facility.
  • Interest is expected to continue to be met in full for most loans over at least this 3 month period (less a Lender fee of 0.075% pm referred to in Stuart Law’s email/video message of 31st of March) from monies held in retention. There will also be an additional charge to Borrowers of 0.15% per month, equating to 0.45% total for the initial 3 months proposed and paid to Assetz Capital to meet the ongoing and increased cost of monitoring the lending book during the crisis. This is only applicable to the extended period and there is no profit element in this proposal for Assetz Capital. At some point in the future we will need to adjust the headline loan limit so the retention once again covers the extended loan.
  • If for any reason funds in the retention account are forecast to be extinguished during this period, which is likely where a loan has expired or near expiry, then Assetz Capital will increase the loan where possible to cater for the extension and payments detailed above.
  • At all times interest continues to accrue on borrowers for the loans, regardless of any loan term extensions or forbearance on interest payments for the next few months. It is not a cancelling of their obligations to you nor a reduction of due sums, just a timing adjustment.
  • Lenders should be aware however that as we emerge from this difficult period LTGDV’s (the ratio of loan to the value of the development) will likely increase on all Developments, in some cases beyond our stated criteria and risk categories may decline.

These proposals ensure that time pressures on projects are alleviated and make no immediate cash demands on Borrowers at this difficult time.

 

For all other loans, typically Commercial Mortgages, where forbearance is requested or payments missed:

  • It is likely that a more modest sum is held in retention for these Borrowers.
  • Where possible we will use these funds to meet interest in full (less a Lender fee of 0.075% pm as above). There will be an additional charge to Borrowers of 0.15% per month, equating to 0.45% total for the initial 3 months proposed and paid to Assetz Capital to meet the ongoing and increased cost of maintaining the lending book. This is only applicable to the extended period and there is no profit element in this proposal for Assetz Capital.
  • Capital repayments will be suspended for an initial 3 month period.
  • Assetz Capital proposes to increase the loan where possible to top-up the retention account to cater for the extension, interest and fee payments detailed above.
  • Where necessary and requested by borrowers, loans will be extended by 3 months, and this will include automatic extension for all loans that are due to expire within this period of forbearance. It may be that under prevailing economic conditions we need to extend this proposal to a maximum of 6 months.
  • At all times interest continues to accrue on Borrowers for the loans, regardless of any loan term extensions or forbearance on interest payments for the next few months. It is not a cancelling of their obligations to you nor a reduction of due sums, just a timing adjustment.
  • Lenders should be aware however that as we emerge from this difficult period LTV’s (the ratio of loan to the value of security taken on that loan) may increase on some loans, in some cases beyond our stated criteria and risk categories may decline.

Lenders are reminded that some Borrowers will simply continue to meet their commitments, in those instances existing Loan Agreements will continue to apply. Again however, we endeavour to make no immediate cash call on Borrowers at this difficult time.

This proposal reflects a balance of maintaining interest payable to Lenders whilst protecting Borrowers from significant cash calls and interest hikes that are currently prevalent in the market. The charge to Borrowers when added to the proposed Lender fee represents the cost of the intensive work currently being undertaken by Assetz Capital on the lending book even after a significantly reduced overhead cost. We’ll continue to provide Lenders with updates on loans during this process.

 

How long is the forbearance period expected to last?

This is a temporary measure, initially for a period of 3 months but, subject to how the situation develops, perhaps longer.


How have Assetz Capital formulated this proposal?

As you would expect we are in close contact with our Borrowers and all sectors are affected to include Development, Care, Commercial Mortgages to Trading Companies, Leisure and Landlords. We have been working tirelessly reviewing how we can best protect all parties, that is yourselves as Lenders, all our Borrowers, and ourselves, to ensure that we all emerge from this period of uncertainty, we can’t say unscathed, but in good shape and ready to enjoy a more stable and prosperous environment.

In formulating this proposal, we have been assessing the loan book and any likely impact of the lockdown, including changes to security value, effects on Borrowers businesses and sectors, and potential levels of forbearance required. We are aware that there will be some Lenders who favour cutting their losses, in other words, immediately default Borrowers who don’t pay and put them in a recovery process. If we were to do that, our experience of valuation reports currently being received is that Valuers are beginning to place a Covid-19 discount of up to 40% on their numbers and in some instances when reporting a figure that could be achieved within 180 or 90 days, that figure is a cautious £0, principally to reflect the current uncertainty. This indicates that short term realisation of Borrowers assets is not only contrary to the Government’s advice and expectation, but also likely to achieve very little.

 Will Assetz Capital's proposal apply to defaulted loans?

Please note that forbearance measures outlined within the Assetz Capital proposal will not apply to defaulted loans and existing arrangements will continue.

What was the vote?

The vote was available via your dashboard. In this vote we asked  Lenders to vote on their preferred way forward, selecting either “Option A” or “Option B” which are shown below: 

Option A: We agree with the proposal above to support borrowers at this time.

Option B: We disagree with the proposal above to support borrowers at this time.

 

Who was asked to vote?

Given the wide-reaching nature of this vote, all Lenders, including those invested via the Access Accounts will be approached.

As per our terms and conditions the vote is based on the value of holdings in a loan and not, one Lender, one vote.


What happens if I didn’t vote?

Non-response will be counted as agreement as the Government is encouraging lenders to offer forbearance to borrowers and we believe this is fair in the circumstances.  We need to progress forwards on this matter as we need to make decisions for the benefit of borrowers and therefore lenders.


When does the forbearance vote close?

The forbearance vote closed at 9:00am, Monday 6th April 2020. 

 

Can I change my vote?

enquiries@assetzcapital.co.uk before .  Unfortunately the vote closed at 9:00am on Monday 6th April 2020 and you cannot change your vote after this time.


How will I find out the result of the forbearance vote?

The results of the lender vote have been published at the top of this blog.


Are Assetz Capital required to accept the result of the forbearance vote?

Assetz Capital will act in line with the lender’s majority instructions.

- April 8, 2020

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