Lender’s administrators eye legal action to recover assets

Business recovery and insolvency firm RSM has successfully mounted a court application to extend the administration of Lendy by 36 months to May 2023.

RSM said the three-year extension is designed to give them sufficient time to realise and distribute the key assets of the administration.

A spokesperson for the administrators said: “This is a complex administration and there are a variety of assets which will take significant time to collect. Significantly it is anticipated legal action will be required to collect these assets.”

Lendy entered administration on May 2019, but the process has been plagued by the complicated and significantly worse than expected state of the loan book, and several other factors.

After discovering deficiencies in Lendy’s processes for taking on new investors, RSM had to revalidate all anti-money laundering checks on investors, which the administrators said were “unacceptable” in an update on the case.

RSM called in Experian to undertake electronic checks on investors. It was discovered after this process that of the 10,000 investors, 2,000 failed the AML checks, or had to be referred for more queries.

On their appointment, the loan book at Lendy was worth £152m, split between £36m of property bridging loans and £116m of development finance loans.

To make matters even more complicated, 16 of the bridging loans and 15 of the development loans, worth a combined outstanding value of £130m, have insolvency proceedings against them.

RSM has also filed documents relating to the conduct of Lendy’s directors. With the help of law firm Pinsent Masons, they have been investigating transactions with group companies and associated parties, which are ongoing. An update for creditors also shows that RSM is keeping the FCA abreast of its findings.

Another challenge RSM faces is the prospect of legal action, funded by crowdsourcing, from The Lendy Action Group (LAG) which includes investors who want to challenge how recoveries will be distributed to creditors.

They’re objecting to a proposed ‘distribution waterfall’ that sees former Lendy investors split into two groups: model 1 and model 2, which impacts how they receive funds.