Wellesley & Co Closure – What Should Investors Do Now

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Wellesley & Co

Wellesley & Co Review

** Wellesley & Co review updated September 29th, 2020**

Wellesley & Co was a company once considered by many as one of the premier peer to peer lending investment choices. Unfortunately, they reduced interest rate returns and ceased offering a peer to peer product, to focus of mini-bonds. When this happened, I exited in December 2015 as I no longer considered Wellesley as a viable investment choice.

Unfortunately, the writing seemed on the wall for Wellesley as they announced ceased operations in September 2020. Wellesley & Co. later announced it would become unregulated by withdrawing their FCA regulation, and cease offering retail mini-bonds and focus solely on institutional funding.

Read on for my thoughts on Wellesley & Co and what this means to you if you are an investor.

Wellesley & Co Review: What You Need To Know

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  • Company Financial Health?
  • No peer to peer lending products, only mini-bonds and property bonds
  • Mini-Bonds are an investment into Wellesley & Co the company. If the company fails, you will likely lose your money
  • Mini-bonds cannot be traded or sold
  • Property-bond will be tradable and value can fall
  • Risk not worth returns. Too many better options.

Wellesley & Co used to be one of my favourite peer to peer companies very early on in my peer to peer lending, but now only offers mini-bonds which are essentially an investment into Wellesley & Co rather than into peer security back peer to peer loans. I’ve never been a fan of investing in company bonds so I steered clear of investing into Wellesley & Co.

Wellesley & Co Review: My experiences ….

I originally began investing in Wellesley & Co’s peer to peer loans in June 2015 as Wellesley & Co was my second hop into the peer to peer waters as they advertised secured peer to peer lending backed by a provision fund, plus an early exit strategy if needed.

In late 2015, Wellesley & Co announced they were reducing interest rates and changing loan terms, so I withdrew all funds immediately and never reinvested.

What Is Wellesley & Co?

Wellesley & Co is an alternative investment company that offers investors’ either Mini Bonds or Property Bonds. In May of 2017, Wellesley announced they would pause additional investments into peer to peer lending until Q3 of 2017 while they attempt to comply with the FCA regulators. Peer to lending never returned.

When Did Wellesley & Co Launch?

November 2013

Is Wellesley & Co Regulated? 

Yes, by the UK Government’s Financial Conduct Authority registration #655503 under full permissions. FCA regulation is nothing like the FSCS (Financial Services Compensation Scheme), which covers consumers when they deposit money in banks. The FCA does have the ability to pursue criminal action against companies it finds are in violation of its standards, but it’s not a government entity and is funded by the companies it regulates.

Wellesley & Co Financial Health

Wellesley made an after-tax profit of £96,524 for the tax year ending December 31st, 2017 then managed to show a £10.2m loss in 2018. Company accounts can be reviewed here.

What Happened To Wellesley & Co?

In September 2020, Wellesley announced it was suspending investor payments while it attempted a voluntary restructuring of its business. Wellesley’s website states:

“Following a strategic review and an independent analysis of its business in response to the ongoing market challenges, Wellesley has suspended all payments as it embarks upon a restructuring process which aims to achieve a better outcome for all investors.After seven years of trading, 2020 has presented unique and unforeseen challenges that have hindered the business’ future liquidity position including the Covid19 pandemic and proposed changes in the regulatory environment which mean that Wellesley may no longer be able to raise funding through the issue of listed bonds on Euronext Dublin (formerly the Irish Stock Exchange). As such, Wellesley has entered a course of action to restructure, recapitalise and address these challenges accordingly”.

In simple terms, Wellesley’s business appears was unsustainable in its current state as it was losing money and couldn’t raise more money to fund its business or new loans.

It appears the company unsuccessfully tried fundraising via listed bonds on the Euronext Dublin (formerly the Irish Stock Exchange). It’s hard to din people willing to invest money into a company that’s’ losing money and has been for several years.

At the end of September 2020 following the results of a creditor vote, Wellesley & Co. announced they would become unregulated by the FCA, cease offering retail bond products and focus on institutional funding.

If You Are An Investor, What Will Happen To Your Money?

Unfortunately, if you are invested in Wellesley’s regular mini-bonds, you were lending money to Wellesley. That money was then used for company expansion and to lend to borrowers.

Wellesley & Co. has announced they will close their retail investment products and focus solely on institutional funding. New and investors won’t be able to actively invest.

Under Wellesley & Co’s proposed voluntary restructuring, here’s what you might be offered if the proposal is voted through:

P2P Investors: 48p on the pound to cash out
 
Existing 1st series mini-bond investors (issued in 2014): 58p on the pound to cash out or 73p on the pound if you take Wellesley equity shares and don’t cash out.
 
Asset-backed mini-bond investors (issued 2019 onwards): 71p on the pound on a cash basis or 89p if you take Wellesley equity shares and don’t cash out.
 
What would I do? Cash out and write the losses off against taxes. I have less than zero interest in being a Wellesley & Co. shareholder. The company reported losses of £10.2m in 2018.

Wellesley’s situation is the reason I steer well clear of mini-bonds. Lending money to companies is highly risky and the returns never match the risk.

If you are invested in the property bonds, those bonds are in a slightly better position as they are secured by property loans but that’s still not a guarantee on the recovery side as it depends on the borrowers’ ability to repay their loans.

If the worst happens and borrowers default, recovery amounts will depend on the accuracy of the RICS valuations and how much the properties achieve on sale.

If Wellesley cannot restructure and ceases trading, those property loans would be called in for repayment or the properties would be defaulted and sold.

In either case, you will be facing a lengthy recovery process should Wellesley cease trading.

Is There Anything I Can Do As An Investor?

Unfortunately, there’s little you can do while Wellesley tries to restructure its current business.

What’s Next For Wellesley & Co?

Wellesley will shut down its retail investing business and become unregulated in order to focus on institutional funding. In the meantime, creditors will vote on the CVA. If the vote is successful, investors will be presented with a loss decision as outlined above. Management will then continue to work with developers and borrowers to repay loans over a two to three year period.

If the vote is unsuccessful, it’s likely Wellesley & Co. will fall into administration and investor losses will be greater.

We should know more in mid to late October 2020 when the voting results are released.

What Are The Loan Default Rates? 

You can see current loan book statistics here.

How Long Are The Investment Terms?

One to five years depending on the product you choose.

What Are The Main Risks?

Company Failure: This is a risk with every peer to peer company. If the business model fails, investors could lose all of their investment even though older peer to peer loans are backed by property. Wellesley & Co is now experiencing possible company failure as they try to restructure.

Economic downturn: Since Wellesley & Co has only been around since 2013, it hasn’t experienced a severe economic dump or property crash. If one happened, the risk is that properties aren’t worth what they were valued at and in the event of a quick default sale, could bring less money than was owed on the loan note.

Is There A Provision Fund?

No

Am I Lending To Wellesley & Co Or To Borrowers?

P2p lending: Money lent directly to borrowers
First issue unsecured Mini-Bonds (2014): Money lent to Wellesley & Co
Asset-backed Property Bonds: Money lent to Wellesley & Co but secured by property

What Happens If Wellesley & Co Ceases Trading?

While Wellesley has a trustee in place which would assume the responsibility of managing the loan book to attempt repayment of existing loans, the issue with bonds is while they invest in secured loans, the bonds themselves are unsecured.

If Wellesley & Co goes into administration, all its assets would be used to repay creditors and investors however capital losses would occur. Administrators fees really add up, sometimes in the millions, therefore cutting into the money creditors and investors are paid.


My Strategy

I withdrew from Wellesley & Co December 2015 when I no longer thought the risk was worth the lower interest rate returns they were offering to lenders’. When mini-bonds become a companies sole offering, I tend to exit as soon as possible.

The Wellesley & Co Review Conclusion

Wellesley used to be one of the favoured alternative finance companies but things took a  turn for the worse when they purposely lowered their returns to deter new investors and then suspended further peer to peer lending investments to focus on unsecured mini-bonds.

The Mini and Property Bonds offered are direct investments into Wellesley & Co rather than into peer to peer loans. The bonds were introduced to raise capital. There were far better alternatives in the peer to peer world that I believed were less risky.

I don’t know if Wellesley will be able to restructure their business but my hope is that investors losses will be minimal. For now, if you are an investor, you will have to wait and see.


Wellesley & Co review disclaimers: I’m not paid to write this Wellesley & Co review nor am I employed by or any of the companies I write about. In most case, I have invested or continue to invest my own money through these companies. The sign up links on this Wellesley & Co review and in other articles on this website are often referral links. When you sign up for an account through my website, I receive a referral fee directly from the companies, at no cost to you. Your support enables me to continue to operate the Financial Thing website. You can read more about my referral links here.

This Wellesley & Co review is for information purposes only and should not be regarded as investment advice. Opinions expressed in this Wellesley & Co review are current opinions and based on my own personal experiences. Peer to peer lending contains risk so never invest more than you can afford to lose.