Thoughts on Finance, Current Affairs and General Consumer Ripoffs - Damn Lies and Statistics

Update - as of March 2020 the Savings Explained website is now offline. Hopefully they didn't attract too many people with their misleading adverts. A new website called Savings Explained has been marketing on Facebook and printed media recently. Despite the name it doesn't seem to be doing much to explain savings and if anything is making the situation more confusing with their adverts They claim " Savings Explained was founded with one basic aim – to make savings less complicated" If that's the case why are they advertising high risk, unregulated investments from what appears to be a linked company alongside regulated FSCS protected investments. It doesn't suggest that Astute Capital and Savings Explained are a scam but they certainly aren't being very transparent or explaining the risks of investing when they are promoting themselves as SAVINGS explained but plugging investments where your capital is at risk. Savings Explained reviews ...

Companies Loaned Money by LCF The 12 companies that London Capital & Finance loaned money to have not been named by the administrators but the information is publicly available at Companies House. One of the companies is also loaning money to a company on the London Stock market so has to publish details of the loans. These companies are shown as owing money to LCF, this is not speculation, this is factual information from the government register of UK companies. The list of 12 companies is shown below along with the date the company was created and the date the loan from LCF was given according to the information submitted to Companies House. As can be seen many of the companies are brand new when they had loans from LCF and 9 of the 12 were under 3 years old so cannot have passed the LCF Due Diligence tests for making loans that are quoted in the Information Memorandum. Company Name Date Formed Date of LCF Loan CV RESORTS LIMITED Feb 2013 ...

According to the administrators London Capital & Finance paid out 25% of the bond money it received from investors to a third party as commission and processing payments. This means that loan costs need to recover this 25% fee as well as the 8% interest that investors are expecting so that they can have their capital repaid in full when their bonds are due. The administrators have calculated that companies borrowing from LCF would be required to pay up to 44% interest for a 1 year loan, up to 74% interest for a 3 year loan to be able to recover the fees paid out as commission. These rates are exceptionally high and way above the loan rates that any normal company would expect to pay so there is some doubt whether they are even viable. One company that we do know borrowed money from LCF is called London Oil and Gas Ltd. We know this company then lent the funds on to other oil companies. A key statement is that the loan to London Oil and Gas only has interest payments made at m...

The administrators of London Capital and finance have issued an email to bondholders today that essentially confirms many of the findings that have been posted here and on the Bond review website. They have stated that LCF paid £60 million to Surge financial as commission and given some calculations for the returns that would be required to recover that money which is up to 44% in a year in the case of 12 month bonds. I'd originally suggested £50 million as commission payments so this is a worse situation than the one I thought could be likely. If this money was paid out from the bonds then it wasn't available to lend out and earn a return so the loans had to work even harder. They've also said that those returns are very unlikely. The summary details from the letter to bondholders dated 21 Feb 2019 is as follows: There are 11605 bondholders who invested £236 million into bonds with London Capital & Finance. This gives an average amount each bondholder inv...

Yet another ISA has popped up that gives the appearance of being a cash ISA yet it is actually an unregulated investment where you could lose all your money as it is not FSCS protected. It is not a cash ISA but another type called an Shares ISA (S&S ISA) that invests in bonds which are loans to companies. This is sold by a company called Astute Capital. Bond Review has now reviewed the Astute Capital ISA here The risk warning is so small and in such a position that most people won't see it . If you think the Astute ISA is a cash ISA and your money is safe then you are at risk of being scammed. The promotion appears to be via a company called Savings Explained yet they fail to point out that your money is at risk and the products they are selling are not savings but investments where you can lose all your money . Comparison with bank savings is incredibly misleading as they are in no way similar. They claim to be asset backed for security. London Capital and Finance...

Update - Blackmore have recently updated their website to say that bonds ARE transferable but there is no process to do so. This may mean that they comply with ISA regulations. Recently London Capital and Finance had problems when the FCA ordered them to cease marketing their bonds and investigated them for misleading marketing information. It appears that Blackmore Bonds are using some of the same tactics that caused problems for LCF. Blackmore Bonds ISA advert on Google As outlined on the FCA website  ruling related to LCF for bonds to qualify to be held in an ISA they must be transferable. LCF bonds were not so the LCF ISA was not legally allowed as an ISA. As the section from the FCA report makes clear  London Capital and Finance bonds were not ISA compliant because they couldn't be transferred to anyone else. FCA ruling on London Capital & Finance It appears that according to the Blackmore Bonds website their bonds cannot be transferred either whic...

London Capital & Finance made 5 bullet pointed claims in their advertising which have been completely blown apart by the events of January 2019 after the FCA acted. Initially FCA forced them to cease all their marketing and then to freeze all their assets before LCF called in the Administrators in late January 2019. 1) Authorised and Regulated by FCA This was one of the reasons that the FCA forced London Capital & Finance to remove all their marketing. They are not regulated for investments so investors in their bonds are not protected and have no FSCS protection. 2) 100% Track Record Another misleading statement. Past performance is no guarantee of the future as LCF investors found out when the 100% track record was no more. 3) Full Asset Backed Security London Capital & Finance made bold claims about the value of assets that were backing their loans. Unfortunately when you investigate these assets they don't appear to be anything physical and in som...

After seeing the details for the commission & costs of Blackmore Bonds that was being paid to Surge Financial for their part in marketing/selling bonds to investors I had another look at the London Capital & Finance accounts to check the amounts being paid by them for commission. The lines to look at are the Unamortised costs and amortised costs as shown above. The costs associated costs are a staggering £11.3 million p lus a separate item for amortised costs of £3.9 million so total of £15.2 million for £60.7 million of bonds.  Paying £15.2 million out of a bond issue of £60.7 million is a massive  cost for commission and setting up bonds equal to 25% of the £60.7 million of bonds issued to investors. If LCF are paying 25% of bondholder's money out in commission then they need to raise even more from their loans to cover 8% per year plus 25% to replace the reduction in capital. Just getting 8% interest back will mean bondholders are short of their ca...

London Capital & Finance made a big thing in their literature and website that none of their borrowers had defaulted on their loans and that they had a 100% track record. Reading their most recent accounts to 30 April 2017 might give a different picture. It's not a massive number but it indicates that loans made have been written off. According to the accounts published at Companies House there were loans of £418,000 that were written off in the year ended 30 April 2017. This isn't a massive number as it's less than 1% of the loans outstanding but it does seem to show that LCF claims that no defaults had ever taken place are incorrect. LCF Directors salaries 2017  Also interesting from the 2017 accounts is that the directors of LCF were paid NOTHING! That's right, no director was paid any money as salary. Even the 6 employees of LCF were only paid a total of £96k between them, that's only £16k each on average including all their tax and national ins...

The last accounts for Blackmore Bond plc are only submitted to 31 December 2017 so we have no information yet about their latest financial year. However the information for 2017 gives some insight into the company which made a loss of £7.6 million having sold bonds to investors worth some £25 million. It's clear from the accounts that Blackmore Bonds pay Surge Financial significant amounts for introducing investors "The loss of £7.6million has primarily arisen from the charging of distribution fees by our partner Surge Financial" https://beta.companieshouse.gov.uk/company/10273135/filing-history On bond sales of £25 million, Blackmore Bonds paid Surge Financial £5.1 million . This almost exactly matches the 20% alleged for LCF and is a substantial chunk of investors money going out before even being invested and means they need to grow their assets at an even higher rate to recoup the 20% Surge deductions before getting 8% interest. Anyone considering in...

The excellent Bond Review blog had a good summary of the initial impression that Smith & Williamson administrators made when they began their work on London Capital & Finance. Some additional information has since emerged from various discussions between the administrators and the owner of a LCF Bondholder Facebook group. LCF Administrators New Claims In the summary provided on the Bondholder Facebook group there are some quite startling claims that Finbarr O'Connell has apparently made. S&W have been contacted for comment and I'm awaiting confirmation from them that the statements attributed are correct. Two claims in particular raise significant questions, firstly a suggestion that problem was that LCF had grown too fast and were trying to recruit a finance director to file their accounts and secondly a statement that LCF had paid Surge Financial (the company that marketed and handled the customer contacts for LCF) money to underwrite the loans. 1) L...

When looking at the accounts for London Capital & Finance your head starts spinning as the whole setup goes round in circles. The situation with one of the companies called CV Resorts Ltd that borrowed money from LCF is a good example. CV Resorts Ltd borrowed money from LCF but also borrowed from another company run by common directors called Cape Verde Support Ltd. https://beta.companieshouse.gov.uk/company/08422800/charges The charge for the loan agreement between CV Resorts Ltd and Cape Verde Support Ltd makes curious reading. A familiar name for those looking at LCF, Simon Hume-Kendall signed the loan agreement on behalf of CV Resorts Ltd, his opposite number signing on behalf of Cape Verde Support Ltd was none other than Simon Hume-Kendall so the same person was signing the contract for the lender and the borrower! At least the witness Robert Mannering Sedgwick didn't have far to travel as all the companies were based in the same office address as him at...

London Capital & Finance made a big thing about having asset backed security for their bondholders/investors and made it one of the selling points in their adverts. I wonder how many investors actually checked what the security was and what it was worth. What Secured Assets Back LCF Loans? One of the main publicly known loans that LCF made was to a company called London Oil & Gas (LOG) that then lent the money on to at least two other companies called Independent Oil & Gas and Atlantic Petroleum. Independent Oil & Gas loan security When you look at the security that LCF have taken for this loan you might be surprised to see that it doesn't actually comprise any physical assets. The only security that is listed is the loans that LOG has made to Independent Oil & Gas in 2015 & 2016. These loans may only have the same face value as the money that LCF has lent to London Oil & Gas so it's very unclear how it can support the claim that the asse...

Note: Original post made on 13 Jan 2019, republished on 9 Feb with new information. London Capital & Finance made a big thing about their bonds having Asset Backed Security. This has been picked up by investors in the bonds. "We're ok, all the bonds are asset backed". Well, yes. And no! The assets need to be worth something and they would need to be sold to pay the lender and that may not achieve their loan value. You also need to have the assets in the first place. It is also the case that LCF have Companies House charges on companies they have lent money to that were applied AFTER another fixed charge already existed on the accounts. It may be academic as the assets are only £10,000 at the time but it means LCF cannot enforce that security. As a bondholder of LCF you are essentially loaning money to London Capital Finance and are an unsecured creditor of the company. You are reliant on them making sure that assets are worth what they say and carrying out thei...

This is the transcript of a BBC Moneybox interview with Finbarr O' Connell of London Capital & Finance administrators Smith & Williamson. Some repetition has been removed but this does not alter the meaning of the replies. You can hear the interview in full on the BBC website here There are some astounding statements in this interview which I believe will come out in the fullness of time and I strongly suspect will be shown to be false in same the way that the initial claim that all investors were either high net worth or sophisticated investors when the vast majority appear to be ordinary retail savers. In particular the claim that "security is in place" and that the £236 million is all accounted for in loans but then says that they haven't had any conversations with the borrowers yet. How can they know security is in place without even speaking to the 12 companies? If they'd looked at the accounts available to the public they would know there were s...

What happens when administrators are appointed? The administrators are appointed to run the company because LCF management have realised that it is insolvent. You can find out more details about insolvency here There are two ways to determine whether a company is insolvent, either: cash-flow test: is your company unable to pay its debts as they become due? (a company is taken to be unable to pay its debts if it can’t pay a court order against it or if a creditor who you owe more than £750 to, has formally demanded its money and the debt has not been paid within three weeks); balance sheet test: are your company’s assets worth less than the amount of its present and future debts?  We don't know whether one or both of these situations applied to LCF but it is suggested that the flow of new money was required to repay bondholder's interest and capital.  It's really important to note that the administration and the freezing of accounts by the FCA only affects  L...

A lot of investors (aka bondholders) in London Capital and Finance (LCF) are asking the valid question - how much money am I likely to get back from my LCF bonds? In this kind of situation the return to investors is normally quoted as pence in the pound where 100 pence in the pound would be a return of your capital in full.  It's obviously a very difficult question to answer as the administrators are only a week into their appointment and have been making some potentially very misleading statements which appear to be designed to appease investors and stop them getting in contact rather than actually giving information that may assist. Bank Accounts It has been claimed that £4 million was found in LCF bank accounts at the point they were frozen. If correct this is money that can be recovered for investors but as the most easily realised it is likely to be the first place where administrators get paid from. However there is a lot of public information available on the lo...

How Many Bondholders were affected by LCF administration? The administrators have now said there are 11,000 bondholders holding approx 14,000 bonds with a face value of £236 million FAQs have been updated on the LCF website by the administrators Further news on LCF & Surge Financial As you'll have seen from previous blog posts the information posted about London Capital & Finance is all material that can be obtained and verified from public sources such as Companies House, Google searches, company websites and social media. However as a result of the information on this blog I've received various information about LCF that isn't public domain and so comes with a certain degree of warning that the accuracy may not be 100%. Having said that, the information that has been received previously has proved to be correct but like investments it's not guaranteed. It has been suggested that the only money left in London Capital & Finance bank accounts was...