London Capital &Finance - Declares Insolvency,Enters Administration

LCF Administration Announced 

It won't be a surprise to anyone reading this blog but on 30th January 2019 London Capital & Finance was declared insolvent and the High Court appointed administrators to manage their affairs and recover any money for bondholders and creditors.

The announcement says that LCF was insolvent as a result of being unable to obtain money from new investors. It does raise the question why new investors money was required to remain solvent which sounds like the hallmark of a Ponzi scheme where new investors pay the interest or capital of those investors due their money back.

If you've read the posts here over the last month you would be right to wonder if there is any value in the company that the administrators will be able to get for the bondholders. They've said it may take another 8 weeks to find out the situation with the company assets which will be a nerve wracking time for investors in the company. Sadly I suspect many investors will be very disappointed and from what you've read here previously I wouldn't expect a lot in the way of assets to be recoverable due to the way the company has structured the loans.

According to the LCF FAQ document there were around 14,000 bondholders who had lent £236 million to the company which is a somewhat higher number than had previously been suggested.

Some people have blamed the FCA for the situation or are still clinging to hope that LCF can be believed and all is ok with their business. The reality is that failure was always going to be the outcome as 8% is not an amount that is possible to guarantee long term especially when up to 25% of the initial investment was paid out as commission to a third party.

It's rather worrying that the administrators have made this statement on their website that is clearly untrue as many savers invested life savings in LCF.

Smith & Williamson said "investors in LCF's mini-bonds were UK retail clients who fell into the category of high net worth individuals, self-certified sophisticated individuals or restricted investors."

https://www.fca.org.uk/news/news-stories/london-capital-and-finance-plc-enters-administration

Whether fraud has been committed or it's just the natural outcome of investing in extremely high risk unregulated bonds we don't yet know but these were always a very high risk option that LCF misled investors about.

London Capital &Finance - Insolvent and Enters Administration

I'm sure investors will be looking at the LCF adverts with a more critical eye now and maybe noticing the "CAPITAL at RISK" warning that may have been missed originally

What happens if I had an ISA with LCF?

If you had an ISA with LCF then that ISA allowance is entirely dependent on the amount that is eventually recovered by the administrators.

https://www.standard.co.uk/business/thousands-of-investors-face-worry-as-high-risk-loan-company-london-capital-finance-collapses-a4054316.html