London Capital Finance - What are their Loan Costs?
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 maturity - ie when it is repaid.
No interest is paid before that point so how are bondholders getting their interest payments? Is this a Ponzi scheme where new investors' money is used to pay existing bondholders?
According to London Oil and Gas Ltd's most recent accounts up to 31/5/2017 they had a 2016 loan from LCF of £20 million which was due for repayment to LCF in March 2019. This is strange because the administrators have said that no loans are due for repayment at the moment.
https://beta.companieshouse.gov.uk/company/09734575/filing-history
As per the details shown above the loan agreement states an interest rate of 1.75% above the rate that LCF pays its bondholders so 1.75% plus 8%. This is way off the 44% that is required to pay back bondholders in full with the 25% commission payment.
London Oil and Gas then lends this money from LCF on to other companies. It's unclear how it can make a profit here as the onward loans are lent to Independent Oil and Gas at 9% plus LIBOR (an inter-bank interest rate) which is currently 0.67%, giving a total of 9.67%.
So London Oil and Gas borrows at 9.75% and lends out at 9.67%. That doesn't sound like a way to make any money. Even if you use the 12 month LIBOR rate of 1.13% it still only gives a rate of 10.13% compared to a cost of 9.75%. London Oil and Gas seems to be trying to make money from converting the IOG loans into shares which appears to be about the only way these loans will create a profit.
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 maturity - ie when it is repaid.
No interest is paid before that point so how are bondholders getting their interest payments? Is this a Ponzi scheme where new investors' money is used to pay existing bondholders?
According to London Oil and Gas Ltd's most recent accounts up to 31/5/2017 they had a 2016 loan from LCF of £20 million which was due for repayment to LCF in March 2019. This is strange because the administrators have said that no loans are due for repayment at the moment.
https://beta.companieshouse.gov.uk/company/09734575/filing-history
As per the details shown above the loan agreement states an interest rate of 1.75% above the rate that LCF pays its bondholders so 1.75% plus 8%. This is way off the 44% that is required to pay back bondholders in full with the 25% commission payment.
London Oil and Gas then lends this money from LCF on to other companies. It's unclear how it can make a profit here as the onward loans are lent to Independent Oil and Gas at 9% plus LIBOR (an inter-bank interest rate) which is currently 0.67%, giving a total of 9.67%.
So London Oil and Gas borrows at 9.75% and lends out at 9.67%. That doesn't sound like a way to make any money. Even if you use the 12 month LIBOR rate of 1.13% it still only gives a rate of 10.13% compared to a cost of 9.75%. London Oil and Gas seems to be trying to make money from converting the IOG loans into shares which appears to be about the only way these loans will create a profit.
Hi Jim All these numerous companies follow a pattern set up by this clan with so much activity for a Dormant Company with address changes, appointments resignations then reappointing back the same day makes one Q what is really going on .
ReplyDeleteThis one of Particular interest GLOBAL ADVANCE DISTRIBUTIONS LIMITED 08820833 has most of the group Thomson ,Kendal, Sedgewick, Sands , Barker and Jones . A lot of activity on Companies House Filing for a Company with 2 pound the 11 million drops in on 11 Jan 2016. Just look how many times the accounting period was shortened
LCF accounts show far less in April 2016 so it does not appear to be from them so what's the origin of this 11 million?