notes

First Mintos Notes Are Live – A First Look

wiseclerk

As announced Mintos* launched the first notes today. For an introduction what notes are please refer to my previous article.

To see the new notes listed on the Mintos primary market, investors can toggle a switch on the upper left side

mintos notes primary market
Screenshot May 25th, 2022, click for larger view

Initially there are notes from the loan originators Eleving Group, CashCredit and Sun Finance listed. Notes for more loan originators will be added as soon as they have published the required prospectus.

Clicking on an ISIN brings up the detailed information about the loan set. Most of the offered information mirrors that available for claims, but there are some new parameters, e.g. ‘sink factor’

mintos set of notes
Screenshot May 25th, 2022, click for larger view

Investors have voiced questions and concerns around the shift from the claims to the notes product. Mintos has adressed common questions in this Q&A. One of the most discussed aspects is that Mintos is required to withhold 20% taxes. This amount can be lowered for residents of these countries as soon as they submit a tax residency certifacte from their tax authority to Mintos.

Despite all communication efforts by Mintos it seems an uphill battle. On the German forum in a recent survey 55% of respondents answered that they will stop investing at Mintos as a result of the introduction of the new notes. Another 24% are unsure about it. Similar sentiments can be read on the Czech forum.

If investors will suit the action to the word this might impact Mintos origination volumes in the coming months. Some investors might switch to competing platforms with similar offers, e.g.

It will also be interesting to see if there is an impact on the discounts on the secondary market for claims, as investors might try to sell claims before the secondary market sunset for claims on June 30th. If investors do not wish to hold claims to maturity there might be increasing supply outweighting demand and therefore offered YTMs might rise until June 30th.

 

New Mintos Notes Product Will Launch on May 25th

wiseclerk 1 Comment

mintos logoThe long announced and several times postponed Mintos Notes product will finally launch on May 25th, Mintos* said yesterday. The notes are financial instruments and issued under the new investment firm license Mintos received last year. For each loan originator there will be a seperate prospectus (see example). Mintos mentions safeguarding of investor funds and notes under MIFID II requirements and increased transparency as investor benefits.

mintos transition

Until 30 June, investors can buy and sell investments via claims on the Secondary Market as usual. Then, from 1 July onwards, investors will be able to buy and sell Notes only, as a result of regulatory requirements.

The transition will mean two key changes for investors:

  • As the claims cannot be traded from July 1st onwards on the secondary market, investors will have to hold any claims in their portfolio to maturity
  • Mintos is required to deduct withholding tax depending on the investors country of tax residency and applicable double taxation treaties

My take

The transition will mean a major change for the marketplace that could either stiffle or empower Mintos growth. I expect that many investors will shy away from investing in very long term claims on the primary market in the remaining 7 weeks. Also buyer demand on the secondary market will likely decrease for the claims on long term loans. Potentially this will lead to offers with rising discounts before the trading of claims ends on June 30th.

There is some hesitation voiced among investors regarding the upcoming notes due to the withholding tax and surronding paperwork to claim possible reliefs and reductions (Mintos has announced that it will publish more information on the details). Mintos might try to offer some incentives in order for investors to take the leap and embrace the new product. I also imagine that Mintos will step up investor marketing again, once the notes product has launched. Already Mintos is taking a lot of effort to communicate and explain the coming changes via blog articles and newsletters.

This disruption might also increase the trend of loan originators setting up their own, unregulated investor marketplaces in other jurisdictions than Latvia.

 

Lending Club allows lenders to trade their investments

wiseclerk 3 Comments

Lendingclub.com has introduced a secondary market for lenders. This is a major step, because one disadvantage for lenders in p2p lending was the lack of liquidity. Once the money was lend it was tied up (apart from repayments) until the end of the loan term (typically 36 months and more).

Through it’s secondary market – called Note Trading Platform Lendingclub allows lenders to offer their loans (or more precisely notes representing these loans) to other lenders.

Sellers list Notes that they would like to sell and enter an asking price. Buyers browse Notes that are available for sale, review payment history and the evolution of the borrower’s credit score, and buy Notes at the asking price. Buy orders received before 4pm Eastern time will generally settle same day, while buy orders received after 4pm Eastern time will settle next day.

Information about the Notes
Each listing contains the Note’s interest rate, issue date, outstanding principal, accrued interest, number of payments left, payment history to date, and the variation of the credit score of the underlying borrower since the issue date. Note, however, that the Notes are not “re-graded” over time, so you should not rely on grades assigned to Notes at the time they were issued to assess the current risk of a Note.

The Lending Club note trading platform is operated by FolioFn, a registered broker dealer. Foliofn charges to the seller a trading fee equal to 1% of the transaction amount. There is no fee charged to buyers.

Right now there are no notes offered for sale.