GROWTH THAT ONLY CAUSED US HARM - the perfect storm!
you are right on track.....
have no doubt what happended here.....
1. McIvor comes up with a great idea for a Mortgage Trust
2. He pools our money and makes prudent first mortagge loans
3. we get 8% - Borrowers pay 11%
4. Borrowers are happy - they pay
5. EIF pays us, we are happy
6. McIvor makes 3% plus application fees, he's happy
7. all going well.
8. over time profits accumulate, McIvor builds up equity - still all going well
9. banks and others approach McIvor (or vice a versa) - we will lend you money at say 7% - how much you want - $100M ???
10. But THEY want first charge.... so what does he do.....
11. wrecks a good model - banks get first charge ahead of us (shame no one told us) - McIvor borrows $100M using the security of the loans that we had financed and funded - banks get all that good first ranking secuirty
12. McIvor now has access to an extra $100M and doesn't make money unless he can get it all loaned out and loaned quick - so what to do?
13. he needs BIG DEALS and needs them fast - he has almost no risk - the banks have no risk because they hold a first charge which is now ahead of us - we now carry all the RISK and we both dont stand to gain one cent through this and second, we dont even know that it was/is happening to us.
14. McIvor now earns 3-4% on an extra $100M etc plus plus management fees etc - and because he is now in theory (on paper anyway) accumulating paper profits which he switches into sub-ordinated units - those units get some crazy 20%+ return as well..... he has no real money in there - we are still all locked in BUT now behind the banks who get repaid and paid out first and McIvor whilst in theory sitting behind us , gouges out all the profits and fees because of a high managment fee and subordinated interest return....
15. by end of 2008, he realises the gig is up BUT he has to keep a lid on this disaster looming - a 20% drop in values because of the gearing structure of the loan book could dig deep into INVESTOR funds because they are now the second ranking layer of debt BUT they all think that they are first mortgage secured
16. what does a boy do?? he has 20years work in here and his units which he has spruiked are subordinated behind us all could well prove to be worthless - so keep the BOOK alive for another couple of years and drag out as much as you can - that will be the last big grab....
17. running out of cash? so suspend payments of interest and redemptions.,.... why not ?? everyone else was doing it..... BUT keep ripping the management fees and subordinated return out until, what? it will all go away??
18. keep staff bullied and a Board compliant by paying out big - keep the PR machine primed - dont let anyone near the valuations - no, not any cost - somehow, somehow.....
the PERFECT STORM......
you are right on track.....
have no doubt what happended here.....
1. McIvor comes up with a great idea for a Mortgage Trust
2. He pools our money and makes prudent first mortagge loans
3. we get 8% - Borrowers pay 11%
4. Borrowers are happy - they pay
5. EIF pays us, we are happy
6. McIvor makes 3% plus application fees, he's happy
7. all going well.
8. over time profits accumulate, McIvor builds up equity - still all going well
9. banks and others approach McIvor (or vice a versa) - we will lend you money at say 7% - how much you want - $100M ???
10. But THEY want first charge.... so what does he do.....
11. wrecks a good model - banks get first charge ahead of us (shame no one told us) - McIvor borrows $100M using the security of the loans that we had financed and funded - banks get all that good first ranking secuirty
12. McIvor now has access to an extra $100M and doesn't make money unless he can get it all loaned out and loaned quick - so what to do?
13. he needs BIG DEALS and needs them fast - he has almost no risk - the banks have no risk because they hold a first charge which is now ahead of us - we now carry all the RISK and we both dont stand to gain one cent through this and second, we dont even know that it was/is happening to us.
14. McIvor now earns 3-4% on an extra $100M etc plus plus management fees etc - and because he is now in theory (on paper anyway) accumulating paper profits which he switches into sub-ordinated units - those units get some crazy 20%+ return as well..... he has no real money in there - we are still all locked in BUT now behind the banks who get repaid and paid out first and McIvor whilst in theory sitting behind us , gouges out all the profits and fees because of a high managment fee and subordinated interest return....
15. by end of 2008, he realises the gig is up BUT he has to keep a lid on this disaster looming - a 20% drop in values because of the gearing structure of the loan book could dig deep into INVESTOR funds because they are now the second ranking layer of debt BUT they all think that they are first mortgage secured
16. what does a boy do?? he has 20years work in here and his units which he has spruiked are subordinated behind us all could well prove to be worthless - so keep the BOOK alive for another couple of years and drag out as much as you can - that will be the last big grab....
17. running out of cash? so suspend payments of interest and redemptions.,.... why not ?? everyone else was doing it..... BUT keep ripping the management fees and subordinated return out until, what? it will all go away??
18. keep staff bullied and a Board compliant by paying out big - keep the PR machine primed - dont let anyone near the valuations - no, not any cost - somehow, somehow.....
the PERFECT STORM......
