BBC Moneybox - London Capital & Finance Interview 2nd Feb 2019

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 serious questions about that security and whether the face value of the bonds was actually loaned. It's also curious (but maybe a financial/legal term) that Finbarr talks about the value represented by the loans and not the value of the loans. Does this imply anything about the loans not being made at that amount?

Transcript of BBC Moneybox -Interview with Finbarr O Connell (FOC) by Paul Lewis (PL) (2^nd Feb 2019)

PL -Where is money invested?

FOC -It has been loaned on a commercial loan basis to different companies and security has been taken over companies and lent over different periods of time so some for up to 3 years to match the borrowing for the bondholders.

PL - How many companies are involved?

FOC - It is actually only 12 which is good in way as it means the focus we have to deal with is quite a small number.

PL – Yes the small number implies the risk isn’t being spread with £38 million lent to an oil & gas company. These were supposed to be low risk and you’re entirely dependent on those 12 companies to get your money back?

FOC -Yes it is 12 companies. Security is in place. We’re meeting those entities next week and we’ll know more after that.

PL – The £236m that the firm says it’s lent out, is that all accounted for by the loans to these 12 companies?

FOC -Yes, the numbers all add up. The money the bondholders put in is represented by the loans to these 12 entities.

PL – So if they remain solvent and they pay back the interest or payments due and repay capital on time, the bondholders could be safe, could they?

FOC -Well that, that is.

PL- There’s a lot of ifs but if is that the case?

FOC -Yes that’s absolutely true. Yes, that is the hope. If that’s the case, we’ll maximise the return

PL - There’s a security in place, debenture in place, Security trustee, all of these things were designed to make people think this was a completely safe investment. Are there any signs that's true and there is security trustee and £300m of assets it says?

FOC -Yes the security trustee exists. The security trustee has security over LCF so that doesn’t give really give any extra benefit as the bondholders are owed money by LCF anyway. LCF has got security against the 12 entities it’s loaned money to.

PL – So again it depends on those 12 companies succeeding in what they’re doing and not failing?

FOC -Absolutely. Nobody amongst the administrators has any interest in those companies becoming distressed. We want to work on a cooperative basis to ensure we get back the bondholders money.

PL - Why did London Capital & Finance call in admin?

FOC -The Board was completely frozen and the board were unable to return money to bondholders so needed to bring in external parties who the FCA will actually allow to release the funds and repay the bondholders.

PL - How hopeful are you for the 14,000 investors?

FOC -It’s week 1 of our assignment, we are going to do everything we can to work with these borrowers so I’ll be able to give more real evidence on that over the coming weeks