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 is intended to explain in clear terms 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 Investors to understand and monitor the performance of the Relendex loan portfolio by providing:
- Data on the returns on all P2P loans in the loan book by year, including expected returns after provisions for defaults and anticipated losses, categorized by risk level.
- An explanation of the assumptions used in assessing expected future default rates.
- Data on actual returns received by Investors and anticipated loss-adjusted rates of return on the Relendex platform.
- A detailed explanation of the limitations of the provided data.
Note: Past performance, including loan default rates and investor returns, 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 industry-wide definition of a default or a set timeframe in which a loan should be declared in default. Industry norms primarily relate to consumer credit and SME lending, which differ significantly from commercial property loans.
Each platform provides its own definitions, and Relendex recognises the following categories of default:
1. Technical Default
A Technical Default is defined as a default that is capable of being remedied, with the borrower actively taking steps to rectify the issue. Examples include:
- A borrower failing to make an interest payment on time.
- A breach of LTV covenant.
- Any other material covenant breach in the facility agreement.
- The loan term expiring while an extension is under negotiation.
Key Point: Default interest rates are not normally incurred during a Technical Default.
2. Formal Default
Relendex does not set a minimum timeframe before declaring a Formal Default. Instead, it actively monitors borrowers and can often anticipate default risks before a loan term ends.
Borrowers who fail to communicate or mislead Relendex may be placed in default earlier than the 180 days past contractual payment date required by the FCA.
Implications:
- Default interest rates apply: Typically 150% of the original interest rate.
- Increased risk of capital loss, though loans are secured on property with guarantees.
- Loss of liquidity: Loans in default cannot be traded on the Resale Marketplace.
3. In Recovery
If a borrower is actively working to remedy a Formal Default and Relendex has confidence in their ability to do so, the loan is categorized as In Recovery. This avoids unnecessary legal costs while allowing the borrower to resolve issues.
However, if investors' interests are jeopardised, Relendex will take legal action, including appointing receivers.
4. Loss
There is no standard industry definition of a Loss. However, Relendex applies a prudent approach:
- Losses are declared when assets are realised, even if additional recovery actions (e.g., claims against guarantees) are ongoing.
- If recoveries later occur, previously declared losses are adjusted accordingly.
Formal and Projected Capital Losses and Defaults
The table below shows the anticipated loss-adjusted yield by risk category:
| Risk Category | Description / LTV % | % of Loans 2024 | Actual Avg Yield % 2024 | Anticipated Loss Adjusted Yield % 2024 |
|---|---|---|---|---|
| A+ | Senior RSP (Max. 50%) | 50.9% | 6.85% | 7.03% |
| A | Senior A (Max. 50%) | 20.9% | 6.73% | 6.88% |
| B+ | Senior B (50-70%) | 18.1% | 8.08% | 7.75% |
| B | Senior C (70-75%) | 2.1% | 8.92% | 7.96% |
| B- | Mezzanine (Max. 80%) | 8.1% | 9.15% | 8.00% |
Limitations of the Data
- Past performance figures are not an indicator of future outcomes.
- Assumes no systemic collapse in the UK commercial property market.
- Assumes a normalised property cycle.
- Does not account for opportunity costs due to loan recovery time.
- The introduction of RSP and enhanced borrower vetting may lead to reduced anticipated losses, but this is not factored into the statement.
Anticipated Returns – Advice to Investors
Investors' returns are impacted not only by loan interest rates and successful repayments but also by two additional key factors:
1. Cash Drag
Cash drag, or uninvested capital, can significantly impact overall returns. Over recent years, this has reduced from 16% in 2020 to under 3% in 2024, minimizing its impact on returns.
In 2024, cash drag reduced actual returns by approximately 0.25% per annum.
2. Diversification
A well-diversified portfolio is more likely to achieve returns in line with the Outcomes Statement. Non-diversified investors may see higher gains or total losses depending on loan performance.
Farringdon Portfolio Ltd-managed funds ensure full diversification in line with each investor’s risk profile.
Conclusion
Relendex aims to provide transparency in its approach to loan defaults, recovery, and investor returns. By following prudent risk management practices and enhancing borrower vetting, Relendex continues to strengthen its platform for investors seeking secure and competitive property finance opportunities.