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 Relendex’s procedures for handling loans that have defaulted and provides information beyond the regulatory requirement imposed by the Financial Conduct Authority (FCA).

This statement enables 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, compared against 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 paid to Lenders, should not be viewed as a guarantee of future performance.

Loans on the Relendex platform are not protected by the Financial Services Compensation Scheme and capital is at risk.

Definition of Defaults

There is no single definition of a default, nor an agreement on when a loan should be declared in default. Industry norms are primarily based on consumer credit and SME lending, which differ significantly from commercial property loans.

Due to these differences, the FCA allows each platform to define its own default criteria.

The Relendex Definition of Defaults

Relendex recognises four categories of default:

• Technical Default
• Formal Default
• In Recovery
• Loss

Technical Default

Loans secured on commercial property are complex, and numerous covenants and obligations may be placed on Borrowers.

A Technical Default occurs when a default is capable of being remedied, and the Borrower is actively taking steps to resolve it.

For example:

• If a refinance or sale is delayed, and Relendex is kept informed, a loan extension could result in a Technical Default.
• Default interest does not normally apply during a Technical Default.

Examples of Technical Defaults:

• A borrower has failed to make an interest payment by its due date.
• A Loan-to-Value (LTV) covenant has been breached.
• Any other material covenant in the facility agreement has been breached.
• The loan term has expired, but the borrower is negotiating an extension with Relendex.

Formal Default

Relendex does not apply a minimum time before declaring a Formal Default. Instead, loans are actively monitored, and Relendex can anticipate defaults before the loan term ends.

• Borrowers who communicate openly and give advance notice rarely suffer Formal Defaults.
• Loans can be extended or refinanced to ensure satisfactory outcomes for both Lenders and Borrowers.
• Borrowers who fail to keep Relendex informed or renege on commitments are declared in default immediately.

Note: Relendex may issue a Formal Demand much sooner than the FCA’s 180-day threshold.

If uncertainty exists, Relendex adopts a 90-day post-contractual payment deadline before declaring a Formal Default.

Implications of a Formal Default

• Default Interest Rates apply
• Typically 150% of the original interest rate and coupon offered to Lenders.
• Risk of capital loss increases
• However, all loans are secured against property with personal guarantees, increasing the probability of capital recovery.
• Loss of liquidity
• Loans in default cannot be traded on the Resale Marketplace, leading to restricted access to funds.

In Recovery

A loan is classified as In Recovery when:

• Relendex is confident the Borrower can remedy a Formal Default.
• The Borrower is actively managing the repayment process under Relendex’s oversight.

Receivership is avoided if the Borrower acts in good faith.

However, if Lenders' interests are jeopardised, Relendex will appoint a receiver or pursue legal remedies.

Implications of Loans in Recovery:

• If the Receiver and Relendex can optimise the outcome, capital and interest will be recovered.
• Relendex may complete developments using house funds to improve the likelihood of repayment.
• Legal claims against negligent professionals may be pursued.

Loss

No standard industry definition of a loss exists.

While Relendex is required to define anticipated loss rates, calculating losses is complex.

Example Scenarios:

Scenario 1:

• A bank makes a loan, sells it at 90% of its value, and records a 10% loss.
• However, if the buyer recovers the full loan, the Lender does not experience a real loss.

Scenario 2:

• A Lender invests £1,000, receives £100 interest over 12 months.
• The loan defaults and repays £950 after 12 months.
• A bank might record a £150 loss, but the Lender might view it as a 2.5% return over two years.

Relendex’s Loss Policy:

• Losses are declared only when assets are realised.
• Additional remedies such as guarantees or legal claims may reduce declared losses.

Formal and Projected Capital Losses and Defaults

Loan Risk Categories

Risk Category	Description	LTV %	% of Loans Originated	Weighted Avg. Coupon Rate %	Formal Default/In Recovery Rate %	Expected Long-Term Loss Rate %	Anticipated Loss-Adjusted Yield % (2022)	2021	2020
A+ Senior/RSP	Senior loans to RSP members	<50%	35.05%	6.55%	0%	0%	6.71%	6.66%	6.58%
A Senior	Senior loans	<50%	38.25%	6.59%	10.69%	0.25%	6.50%	6.27%	6.98%
B Junior	Junior portion of A-grade loans	50-75%	22.17%	8.39%	3.22%	0.99%	7.61%	6.75%	7.02%
B Mezzanine	2nd charge loans	50-80%	4.53%	10%	0%	2.49%	8.51%	8.00%	6.92%

Notes:

• Total expected loss rate applies to the entire loan lifecycle.
• Loss-adjusted yield includes reinvestment of quarterly interest receipts.

Limitations of the Data

• Past performance is not an indicator of future outcomes.
• The data assumes:
  • No systemic collapse in the UK commercial property market.
  • A normalised property cycle.
• Recovery times are not factored in.
• Enhanced underwriting & borrower vetting should reduce losses, but this improvement is not reflected in the outcomes statement.

Anticipated Returns

Lenders’ returns depend on two major factors:

1. Cash Drag

• Unallocated cash significantly impacts returns.
• In 2022, 5.9% of lender funds were held as cash (2021: 10%, 2020: 16%).
• Cash drag reduced returns by approx. 0.44% per annum.

2. Diversification

• Diversified lenders perform closer to anticipated returns.
• A single loan investment carries the highest risk, potentially leading to total capital loss.