Troubled property development schemes spearheaded by a financially stretched former football club chairman account for almost a fifth of the money owed to investors in collapsed peer-to-peer lending platform Lendy.
The P2P platform, which had offered retail investors a 12 per cent return before it failed in May, extended £27m of loans to companies controlled by Stewart Day, the former chairman of Bury Football Club, that have since gone into administration, according to Companies House filings.
Lendy has £152m of loans that are yet to be repaid, including the £27m that was borrowed by Mr Day’s companies to build student flats in various British cities, a spokesman for the Lendy’s administrators RSM confirmed.
Since its launch in 2012, Lendy raised more than £400m from investors to extend to property developers who were considered high risk by high street banks. But its users may not have realised they were funding Mr Day, who oversaw £8.3m of losses at Bury between 2014 and 2017, or understood the concentration of his projects in Lendy’s loan book.
The P2P platform’s website rarely identified the people behind the developments it marketed as lending opportunities, according to project listings that remain on its website.
“If investors are not being told exactly to whom they are entrusting their capital, then they will be exposed to more risk than they know about,” said Russ Mould, investment director at stockbroker AJ Bell.
Adam Bunch, a Lendy investor who said he had put “a six figure sum” into loans arranged by the platform, said: “You could never see who was behind the loans so it was hard to find out if there was any major concentration of risks, but the impression from the website was that the portfolio was suitably diverse.”
Mr Day, who could not be reached for comment, sold his stake in Bury FC to new chairman Steven Dale in December.
A group of companies linked to Mr Day was by far Lendy’s largest borrower, the RSM spokesman confirmed. The P2P platform lent £27m to five companies controlled by Mr Day that were attempting to build student flat developments in Bradford, Huddersfield, Cardiff and Glasgow. Most of the buildings are part-finished or did not begin construction.
Mr Day also relied on other P2P lenders to fund his property developments and Bury FC, which on Thursday agreed a company voluntary arrangement with its lenders to stave off insolvency after struggling to pay players’ wages.
Capital Bridging Finance Solutions, a Liverpool based P2P lender, holds a £1.6m mortgage over Bury’s grounds that was arranged during Mr Day’s tenure as owner and chairman of the club.
In 2016, Capital’s investors also lent £333,000 to Mr Day’s holding company Mederco Limited, which is in administration, secured on a car park in Bradford. A spokesman for Capital could not be reached
Lendy’s investors face losing up to 93 per cent of their money, RSM said this week, because a large proportion of its outstanding property development and bridging loans have entered insolvency proceedings.
The platform, which was started by Portsmouth entrepreneurs Liam Brooke and Tim Gordon in 2012 and rose to prominence as the sponsor of the Cowes Week annual regatta, collapsed after the Financial Conduct Authority froze payments in and out of its accounts because of serious concerns over its business model.
The FCA had authorised Lendy to do business, which was a coveted status for P2P platforms who often started out as unregulated entities, when its financial situation was already strained, according to a report by RSM published this week. This led to the regulator being criticised by former City minister Paul Myners for taking a light-touch approach to P2P lenders in order to foster financial sector innovation.
