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Author Topic: Certificate Investor

R
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Certificate Investor
OP: April 05, 2013, 11:00:00 PM
Looks like investors through LCA got the company to insure their investment against losses with their "Credit Support Agreement."

Oh the sweetheart deals that can be concocted if only you have enough money.   8)

From the 10-K:

Contingencies
Credit Support Agreement
During the nine months ended December 31, 2012, the Company entered into a Credit Support Agreement with a Certificate investor. The Credit Support Agreement requires the Company to pledge and restrict cash in support of its contingent obligation to reimburse the investor for credit losses on Member Loans underlying the investor’s Certificate, that are in excess of a specified, aggregate loss threshold. The Company is contingently obligated to pledge cash, not to exceed $3.0 million, to support this contingent obligation and which number is premised upon investor volume. As of December 31, 2012, approximately $2.3 million was pledged and restricted to support this contingent obligation.
As of December 31, 2012, the credit losses pertaining to the investor’s Certificate have not exceeded the specified threshold, nor are future credit losses expected to exceed the specified threshold, and thus no expense or liability has been recorded. The Company currently does not anticipate recording losses resulting from its contingent obligation under this Credit Support Agreement. If losses related to the Credit Support Agreement are later determined to be likely to occur and are estimable, results of operations could be affected in the period in which such losses are recorded.

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Z
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Certificate Investor
#1: April 05, 2013, 11:00:00 PM
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y
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Certificate Investor
#2: April 05, 2013, 11:00:00 PM
Are they insuring individual loans?

Or an entire portfolio?
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T
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Certificate Investor
#3: April 05, 2013, 11:00:00 PM
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e
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Certificate Investor
#4: April 06, 2013, 11:00:00 PM
Should this type of agreement even be legal? I'm having a hard time understanding why LCA is still associated with LC at all... it makes just about as much sense as a hedge fund that's owned by a stock exchange. Too many potential conflicts of interest here.
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F
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Certificate Investor
#5: April 06, 2013, 11:00:00 PM
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T
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Certificate Investor
#6: April 06, 2013, 11:00:00 PM
I just read the 10-K again: http://www.sec.gov/Archives/edgar/data/1409970/000119312513136975/d450565d10k.htm

While I did see statements about Credit Support Agreement (CSA) page 110, however they seem to contradict the following (paragraph 2 over Overview -- page 2):

The Certificates can only be settled with cash flows from the underlying Member Loans and Certificate holder does not have recourse to the general credit or other assets of the Trust, Company, borrower members or other investors.

To me, it looks like CSA is a recourse.

Anyone can explain what these statements mean?
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T
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Certificate Investor
#7: April 06, 2013, 11:00:00 PM
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T
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Certificate Investor
#8: April 07, 2013, 11:00:00 PM
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T
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Certificate Investor
#9: April 07, 2013, 11:00:00 PM
Just for a better perspective:

For the nine months ended 12/31/2012, LC made $26 million on origination, and $1.5 million on servicing.
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T
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Certificate Investor
#10: April 07, 2013, 11:00:00 PM
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T
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Certificate Investor
#11: April 07, 2013, 11:00:00 PM
LC also collects origination and servicing fees on Notes  that Certificate Investors acquired.  The Management fees are "extra".

I didn't say that LC needs LCA, per se.  I did say LC needs LCA as much as the institutional investors.  If LC somehow decided not to bother with institutional investors anymore, then LCA can go as well.

However, from LC perspectives, the institutional investors are desirable; they provide significant demand on Notes on their platform.

from: ee1x on April 08, 2013, 11:47:37 AM
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T
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Certificate Investor
#12: April 07, 2013, 11:00:00 PM
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T
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Certificate Investor
#13: April 07, 2013, 11:00:00 PM
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A
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Certificate Investor
#14: April 09, 2013, 11:00:00 PM
Last I checked when LC broke the $1B threshold LCA had 'invested' more than $400M in loans from LC.  They were more than half of all loans.  Yes, they need LCA to buy the loans from themselves.
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