Tuesday, 11 February 2020

Blackmore Bond - Where is The Money?

The current status of Blackmore Bonds in a few facts. All put together it doesn't paint a very healthy picture of the company.

  • Blackmore Bond raised over £25 million from investors
  • Many of their developments have seen no work take place and are still building sites.
  • 20% of investor funds were passed to Surge Financial at the point investors handed over money
  • 60% of the GDV (Gross development value) was borrowed from banks for most sites.
  • Bondholders rank after bank lenders in the case of insolvency
  • Accounts for 2018 are overdue and Blackmore have broken the law by not providing them
  • Accounts also overdue for Blackmore SPV development companies 
  • Independent Chairman of Blackmore Bond, Kenneth Buzz West has left the Blackmore
  • Interest payments delayed for August due to "bank issues"
  • Interest payments failed to be paid for October 2019 and January 2020
  • There are only 12 development sites believed to be owned by Blackmore
  • Annual payments from Blackmore Bond to Blackmore holding company appear to be 5% so total over £1.8 million per year. This is money taken out of the pot for investors
  • Blackmore is dependent on continued investor subscriptions to remain viable - these stopped in 2019.
  • Blackmore SPV companies have taken loans against the development property meaning funds are not available to Blackmore Bond
Remember that London Capital & Finance claimed all was well until administrators took over and found the truth. The claims of Blackmore directors that everything is fine does not correspond to the list of issues above.

Many Blackmore investors appear to have been lied to as part of the investment process if they are not High Net Worth or Sophisticated investors and were misled about the risks involved. If Blackmore were prepared to lie about these things why would you believe anything else they say?

One example is Blackmore SPV5 company, fully owned by Blackmore Bond. This is supposedly developing land near High Halden in Kent. The Gross development value of the site is £2.9m. At Dec 2017 this land appeared to be worth £1m. However in November 2018 a loan was taken out against this site which ranks above bondholders for payment. The lender was Nextius Finance and the loan agreement also creates a "negative pledge". This means that no other security can rank above it. If the loan is 60% of GDV then it wipes out bondholder funds.

Taken in total it suggests that the money available within the company at the current time is unlikely to be enough to pay investors back and would explain why interest payments have not been made.

Let's start by assuming £25 million of investor money taken by Blackmore Bond. We don't know the current figure as accounts have not been published but this was the previous value so it will be higher.

20% of this was paid to Surge Financial so £5 million is now removed which means only £20m left. If 5% is paid each year since 2017 as fees to Blackmore Group that's another £4 million gone.

The 2017 accounts show that the GDV for all projects that Blackmore Bond owned was £40 million.

If Blackmore Bond has borrowed 60% of the GDV then this could be £24m that has been borrowed against the sites from banks.

Bear in mind that GDV is the possible sale value of completed sites. Incomplete projects and building sites will be a fraction of this so it's entirely possible that the current value of the assets is only the 40% that bondholders put in.

Banks owed £24 million, bondholders owed £25 million, funds available £16 million (£25m from bonds - £5m to Surge - £4million to Blackmore Group)  - how much was spent on property and how much on other "items"?

However this money has to cover the funds owed to the banks which means that there could be nothing left for anyone else.

Thursday, 6 February 2020

Northern Lights Surety Company SRL Blackmore Bonds

Northern Lights Surety Company SRL are the provider of insurance for Blackmore Bonds according to their paperwork.

But who are Northern Lights Surety Company SRL and is there any way that they will pay investors in Blackmore Bonds the amounts that they are owed if the company goes bust?





The address given for Northern Lights Surety Company SRL is as below:

Northern Lights Surety Company SRL
Plaza Roble
Centro Corporative Plaza Roble
San Jose
Costa Rica

Blackmore Bond - How Much Money Will I Get Back? What Happens Next?

Blackmore Bond investors are rightly asking what happens next and how much money they might get back?


As with London Capital & Finance it appears that many unsuitable investors put money into Blackmore Bond thinking that it was a low risk way to invest money. Sadly it was not - unregulated mini bonds are very high risk and should never be sold to retail investors especially ones that are led to believe that they are similar to cash.
Blackmore Bond - How Much Money Back? What Happens Next?
Blackmore Bond - How Much Money Will I Get Back? What Happens Next?

In terms of how much money investors might get back it really depends what has happened to the company since the last accounts were filed in 2017. At the time of those accounts the company owed £7 million more than the value of its assets. Blackmore have delayed filing their accounts repeatedly and now have missed the date which was 27 December 2019 so are in breach of Companies House legal requirements. It gives an indication of the fate of the company when they have failed to perform even this basic activity which is a requirement of all UK companies to file accounts on time. By hiding their accounts it gives very little information to understand their financial situation which I suspect is deliberate.

https://beta.companieshouse.gov.uk/company/10273135/filing-history

The 2017 accounts have a very key point in them. Blackmore is reliant on new investor money to be able to continue. It has now been nearly 12 months since they stopped advertising new bonds in the UK so this material risk may now have been realised.

The auditors stated in 2017 "there is a material concern over the company's ability to continue as a going concern". It would appear that the company may no longer be a going concern and may be insolvent as it has now been unable to make 2 sets of interest payments to bondholders.

Many Blackmore Bond investors seem to believe that there is an insurance policy in place that will pay out their investment if the company goes bust. Sadly their optimism may be misplaced. The insurance company is based in Costa Rica and there is no evidence of a policy that will pay out even if the insurance company had sufficient money to do so.

Secondly investors seem to believe that the property assets could be sold to pay back the value of their bonds. Again investors may be disappointed. The property assets look to be valued at GDV (Gross Development Value) but most of the development sites appear to have not progressed beyond any planning stages. As such the valuations are likely to be tiny in comparison to the GDV assigned.

Finally the development sites have all been put into separate companies (Blackmore SPVs) which may limit the ability of investors to access the money and may also allow the company to move funds out of the bonds more easily.

In summary the realisations from London Capital & Finance were estimated by administrators to be up to 25% of the value of the bonds sold to investors. So if you bought a £10,000 bond then you would only get £2500 back. Other mini bonds have had much lower recoveries with 94% of investor money lost from Harewood bonds. This would equate to only £600 back from a £10,000 investment.

With the track record of the directors of Blackmore Bond, McCreesh and Nunn with their Blackmore Global fund then it's possible that recovery of investor money may be at the lower end of the scale.

What Happens Next?



Many Blackmore investors are submitting claims of default to the Oak security trustees. If over 50% of bondholders do this then they can put the company into administration to recover any funds available.

Thursday, 30 January 2020

Blackmore Bond on the Brink?

It's reported that Blackmore Bond have failed to make another payment of interest to their investors following on from the failure to pay the due coupon in October. This also follows delayed payments earlier in 2019.

Does this mean that they are getting close to going bust? It may be significant that they have been unable or unwilling to raise new capital from investors since LCF went into administration and their previous accounts raised lack of new money as a material factor in their existence.
Blackmore Bond on the Brink of Administration?
Blackmore Bond on the Brink?

They have also failed to submit their accounts on time and have now missed the Companies House deadline for submission so it tends to suggest that they are now not bothered about the consequences and may just be biding their time until they declare or are forced into administration.

Of course these may be entirely unconnected issues, payments may start flowing again imminently and investors will happily walk away with their capital intact despite the 25% payment of their money to Surge Financial as commission. If this does happen they will be one of the very few unregulated bonds that have managed to make such returns and pay all investors in full.

Sadly many of the investors in Blackmore also seem to be ones that have been hit by the failure of London Capital & Finance so could be in for a "double whammy" should the worst happen to Blackmore too.

Friday, 24 January 2020

How Avoid Investment Scams

How to Avoid Investment Scams


Situations such as the collapse of LC&F highlight the importance of choosing the right investments in the first place.

This list was provided by an investment site suggesting some of the key steps you should take when considering any investment. I believe the list is highly misleading and could easily catch out unwary investors or those who simply don't understand the intricacies of the financial regulation system.

Check it's Authorised - Look on the FCA's register to check the business is actually authorised to conduct financial services businesses. Do an internet search for reviews of the company to find out more about what its customers are saying about it too.

My comment: This is sensible advice up to a point. LCF was listed on the FCA register but the mini bonds it sold were not protected so investors would be left thinking they were covered when they are not.

Understand the Risks - Be certain what the product is and where your money is going. Be wary of any product promising "guaranteed" or "government-backed" returns or too-good-to-be-true interest rates. If it's an investment, your money is always at risk. 

This is good advice. Watch for asset backed, use of the words security/secure/insurance backed. The above LCF promotion shows how misleading it can be when security still means you can lose most of your money.

Take Advice - If in doubt, seek help from a professional. Many people are reluctant to take financial advice because it seems expensive or they don't want to discuss their finances, but as with any area of life it pays to speak to an expert if you lack the knowledge or confidence.

Good advice but when many people can't afford to pay a professional there are lots of other places to get non-tailored advice and feedback. For example the MSE (MoneySavingExpert) forums were repeatedly warning investors to avoid putting money into LCF as far back as 2015.

Don't be Pressured - You should never rush any financial decision and if anyone is pressuring you to make a quick choice, say no - it could be a scam. Any reputable company should be more than happy for you to take time to do your research and think about whether you want to invest or not.

Good advice. Genuine investments do not have high pressure sales tactics.

Read the Small (and not so small) Print


LC&F has issued this Information Memorandum with the words "Investing in LC&F’s Bonds is speculative and involves a significant degree of risk."

LCF Investigation Bondholders - 23 January 2020 Meeting Update

On 23rd January 2020 a bondholder meeting took place in London where evidence was heard for the Investigation into London Capital & Finance by Dame Elizabeth Gloster giving bondholders the opportunity to provide their experiences of their interactions with FCA. The investigation is specifically into the role of the FCA in the regulation of LCF.

The meeting was live streamed and lasted approximately 3 hours. A large number of investors were able to give their evidence to the team and many repeated a lot of familiar points. Quite a few people did seem slightly confused about the role of the enquiry and were posing questions that were outside the scope of the review and expecting answers there and then. There were some very well reasoned points and a few specific issues raised that are worth highlighting.

You can view and listen to the full event on the investigation website here

LCF only failed due to FCA Action in Dec 2018


There are some investors (or possibly stooges) who are still claiming that LCF would still be paying out interest now if it wasn't for the FCA shutting them down in 2018. This might be technically true for a short while but any Ponzi scheme that relies on new money to pay back existing investors will eventually fail. The LCF business model of paying 25% commission and lending money to companies with no means to pay it back was not sustainable.

Insurance Policy in Place for LCF


One investor claimed that LCF staff informed him that an Insurance policy was in place so if anything went wrong they'd be able to claim their investment from it. This is a familiar tactic of other mini bond providers such as Blackmore who also promote having an insurance policy to cover investors but it's the first time I've heard it mentioned in relation to London Capital & Finance.

FSCS Misleading & Incorrect Advice

One investor had specific information from FSCS that LCF was protected by FSCS compensation. This appears to be a more unusal occurrence but is a very serious issue if FSCS is not giving correct information when a query is raised on a specific firm

LCF Investor Due Diligence


One speaker said that they had done due diligence before investing in LCF. Despite their claim of their financial experience their definition of Due Diligence is obviously very different to mine.

Any Google search of LCF would have brought up multiple threads on different forums that were highlighting the issues and reasons why LCF was a risky proposition that was not FSCS protected. Whether these were ignored or not they were certainly very prominent for anyone who did even the most cursory bit of research about the company.

The speaker also claimed to have read the Information Memorandum, if they had done so they would have seen this clearly on page 3 "THESE BONDS ARE NOT REGULATED BY THE FCA AND ARE NOT PROTECTED UNDER THE FINANCIAL SERVICES COMPENSATION SCHEME." There is also this statement "LC&F has issued this Information Memorandum. Investing in LC&F’s Bonds is speculative and involves a significant degree of risk."

While I have every sympathy with someone investing that took LCF promises at face value, anyone who claims that they performed due diligence before investing and still thought they were FSCS protected is being very selective with their memories.

Tuesday, 14 January 2020

What Did FCA Actually Regulate with London Capital & Finance?

What did FCA actually do for authorising and regulating LCF for lending?

FCA have been very clear that LCF was not regulated for investments or savings so no compensation was payable to investors who have lost money when LCF collapsed in 2019. However they have been far less clear about what they DID actually regulate LCF for.


According to the FCA register LCF were authorised for the following activity "The firm must not conduct designated investment business other than corporate finance business." 

Yet the entry on the FCA website is STILL very unclear - according to the screenshot above from Jan 2020 their current status is "Fully Authorised". How are investors meant to know the difference?
https://www.fca.org.uk/firms/authorisation/how-to-apply/financial-services

Even if we accept that FCA have no regulatory requirement to monitor LCF for mini-bonds sold to consumers they were regulated for Corporate finance business but what does this actually mean?

Do the FCA do anything before granting such permissions and retaining that regulatory approval? Or is it an automatic approval without any checks?

LCF was doing the following lending activities:

  • 25% of all bond money received was paid out as fees to Surge Financial
  • Lending money to companies with no assets & no income
  • Lending money to companies before any agreement was in place
  • Lending money to companies without any rights over their assets
  • Lending money to only 12 companies owned by friends
  • Lending money to company without a bank account

These are the activities visible without any internal knowledge of the company, the true situation may include even more dubious practices.

How can it be possible that a company regulated by the FCA for lending can carry out these activities for nearly 4 years without any form of checks?