Relendex Limited is authorised and regulated by the Financial Conduct Authority (FRN: 723117). Relendex Limited is registered in England, Company Number 07486328. Registered Office: 99-100 Turnmill Street, London, EC1M 5QP.

Introduction

The following Outcomes Statement explains in clear terms Relendex’s procedures for handling loans that have defaulted and provides information beyond the regulatory requirements imposed by the Financial Conduct Authority (FCA).

The Outcomes Statement is provided to enable Lenders to understand and monitor the performance of the Relendex loan portfolio by providing:

• Data on actual and expected rates of default on all P2P loans Relendex has originated, split by different categories of risk.
• An explanation of the assumptions used in assessing expected future default rates.
• Data for the actual returns received by Lenders, with comparison against any Target Rates offered on the Relendex platform.

• A detailed explanation of the limitations of the data provided.

  Note: Data relating to past performance, including default rates and returns, should not be viewed as a guarantee of future performance.

Definition of Defaults

There is no single definition of a default, nor a universal timeframe in which a loan should be declared in default. The financial industry norms mainly relate to consumer credit and SME lending, which differ significantly from commercial property loans.

The FCA recognises these differences and allows each platform to define its own default classifications.

The Relendex Definition of Defaults

Relendex recognises four categories of default:

1. Technical Default
2. Formal Default
3. In Recovery
4. Loss

1) Technical Default

Commercial property lending is complex, and numerous covenants and obligations are placed on Borrowers. Some breaches may be minor and go unnoticed by Lenders. A loan can be in default due to a minor covenant breach or a failure to pay interest or repay a loan on time.

A Technical Default is any default that can be remedied, where the Borrower is actively taking steps to resolve the issue. Examples include:

• A delayed interest payment.
• A breached Loan-to-Value (LTV) covenant.
• A material covenant in the facility agreement being breached.
• The loan term has expired, but the Borrower is negotiating an extension.

Implications:
Default interest rates are not normally incurred during a Technical Default.

2) Formal Default

Relendex does not enforce a minimum time period before declaring a Formal Default. Loans are actively monitored, and defaults can be anticipated before the loan term ends. Key considerations include:

• Borrowers who communicate proactively can often restructure loans and avoid actual default.
• Borrowers who fail to communicate, mislead, or renege on commitments are placed into Formal Default at the earliest opportunity.
• A Formal Default may be declared even if the loan is less than 1 day overdue, rather than waiting for the 180-day period stipulated by the FCA.
• A 90-day long-stop period post-contractual payment is adopted for declaring a Formal Default.

Implications of a Formal Default:

• Default Interest Rates apply – typically 150% of the original coupon.
• Increased risk of capital loss or non-payment of interest, although security measures increase the probability of recovery.
• Loss of liquidity – Defaulted loans cannot be traded on the Resale Marketplace, making funds inaccessible to Lenders.

3) In Recovery

If a Borrower is actively working to resolve an Actual Default, Relendex allows them to manage the repayment process.

• Appointing a receiver incurs additional costs and can diminish the Borrower’s capital in the property.
• Relendex aims to avoid these costs if the Borrower is cooperating.
• If necessary, Relendex will take legal action to protect Lenders' interests.

Implications of Loans in Recovery:

• The goal is to optimise capital and interest recovery.
• Relendex may complete part or all of a development using house funds.
• Legal action may be taken against professionals if negligence is suspected.

4) Loss

There is no industry-wide definition of a loss, and calculating an anticipated loss rate is complex. Common industry practices may not align with the Relendex model.

Relendex’s Policy on Losses:

• Losses are declared only when assets are realised and the loss is crystallised.
• Additional recovery methods (e.g., personal guarantees or negligence claims) may later reduce the declared loss.

Actual and Projected Capital Losses and Defaults

The following table outlines the Expected Default Rate vs Actual Default Rate for different risk categories.

Risk Category	Description / LTV %	% of Loans Originated	Actual Default/In Recovery Rate	Anticipated Loan Loss after Recovery	Expected Long-Term Loss Rate	Anticipated Loss-Adjusted Yield %
A+ Senior/RSP	<50% LTV	11.9%	0%	0%	0%	6.58%
A Senior	<50% LTV	67.4%	12.8%	0.6%	1.2%	6.98%
B Junior	>50% <75% LTV	15.7%	7.7%	3.9%	5%	7.02%
B Mezzanine	>50% <80% LTV	5.0%	0%	0%	5.5%	6.92%

Note: The RSP category is new and expected to grow, influencing future loan book distributions.

Limitations of the Data

• Past performance does not guarantee future outcomes.
• Assumes no systemic collapse in the UK commercial property market.
• Assumes a normalised property cycle.
• Does not consider the time taken to recover loans (opportunity cost).
• Enhanced borrower vetting and stronger underwriting teams are expected to reduce future losses (not reflected in the data).

Anticipated Returns

Lenders' returns are impacted not only by interest rates but also by two other key factors:

1) Cash Drag

• Unallocated lender funds can significantly affect returns.
• Analysis shows that 16% of all lender funds were held as cash balances in the 12 months to 30th November.
• This resulted in a 1% reduction in actual returns.

2) Diversification

• Diversification helps match actual performance to expected returns.
• A non-diversified investor could experience total capital loss if investing in a single Junior or Mezzanine loan.

This Outcomes Statement provides key insights into Relendex’s approach to defaults, loan recovery, and anticipated performance. Lenders are advised to diversify their portfolios and reinvest funds efficiently to optimise returns.