Liquidity Event FAQs

Why is this happening?

Why have you called a “Liquidity Event”?

The current situation around the novel coronavirus (COVID-19) has been developing at a rapid pace, with updates coming in near constantly and the effects of the outbreak ongoing. One impact of this has been that we have entered a period of economic uncertainty, with significant volatility being seen by markets around the world. In response, we have been continually monitoring our platform to see how it might be affected by this evolving situation.

Recently we have seen a larger than usual volume of investor funds set to not reinvest. The level that this has reached means that we may not be able to fund drawdown requests and investor Rollovers in the near future. And so, acting in the best interests of both our borrowers and investors, we have decided to call a Liquidity Event.

The Liquidity Event was not called as a result of loan book performance, as this continues to perform at a satisfactory level. However there are a number of work streams we have been focussing on to reduce investors exposure to risk during these uncertain times:

Borrower portfolio risk assessment

We have conducted an in depth assessment of our borrowers and evaluated the risk that negative economic conditions would have on them. We are encouraged with our assessment and will continue to monitor our portfolio as developments unfold.

Cleaning our loan book

In October 2019, prior to the outbreak of COVID-19, we began to re-evaluate the concentration of our loan book by both GrowthLine facility size and industry segmentation. We have made significant progress in managing down and off-boarding GrowthLine borrowers that no longer fit our improved credit risk and industry concentration appetite.

Monitoring borrower performance

We have implemented robust credit breach monitors to evaluate the on-going performance of our borrowers, which enables us to react much more quickly to any potentially adverse stumbling blocks.

What is a “Liquidity Event”?

A “Liquidity Event” is where there is a reasonable opinion from the board of directors of Growth Street, there is not enough money available on the platform to fund all drawdown requests and automated Rollovers which cannot be rectified during normal trading conditions.

During a Liquidity Event there will be a number of changes to how you will be able to operate your investor account:

Your reinvestment settings will be switched on and;

You will be unable to cancel any outstanding lend orders

However, you will still be able to withdraw funds from your Holding Account during a “Liquidity Event”.

If the Liquidity Event is remedied then that platform will return to normal operation.

Why have you not notified your investors sooner?

As soon as we believed that the situation had reached the point where we needed to step in, we made the decision to call a Liquidity Event and let our investors know as soon as possible. We are currently in a period of abnormal market conditions, during which we have endeavoured to act in the best interests of both our investors and borrowers and communicate those actions as soon as we can.

Has this been caused by borrower defaults/portfolio performance?

The Liquidity Event was not caused as a result of borrower performance. We have conducted an in-depth assessment of our borrowers and evaluated the risk that negative economic conditions would have on them. We are encouraged by our assessment and will continue to monitor our portfolio as developments unfold.

Our assessment looked across a range of data points where an economic slowdown could impact a borrower's debtors, suppliers and their overall performance. We remain in close communication with any concerned customers and we will review on a case by case basis should the need arise.

Calling a Liquidity Event has been driven by the unprecedented impact that the novel coronavirus (COVID-19) has had on our industry and the wider economy, which has resulted in increased levels of investors withdrawal requests on our platform.

Has this got anything to do with coronavirus/the stock markets?

As you will be aware, the impact of coronavirus (COVID-19) has been widespread, both at a societal and community level, whilst also having significant economic impacts. We have seen huge levels of volatility in markets around the world, with marked reductions in value across the board.

Whilst Growth Street has not seen this impact on the performance of our borrower portfolio, which continues to deliver relatively stable returns, we have seen an increase in the number of investors who have turned off their reinvestment settings. Because of this we have taken the decision to call a “Liquidity Event”, as we believe this is in the best interests of both our borrower and investors in these uncertain times.

What are ‘normal market conditions’?

‘Normal market conditions’ are where there is an adequate supply of money available on the platform to fund all drawdown requests and automated Rollovers. Rollovers, drawdowns, and as you would have experienced, withdrawals are processed without any restrictions. However, we have recently received a larger than usual volume of withdrawal requests; and an increase in the amount of funds on the platform not set to reinvest. This has resulted in a reduction of available liquidity, subsequently meaning we are no longer operating under ‘normal market conditions’.

Is this what is happening with other Peer to Peer companies?

We cannot comment on specific cases occurring at other peer to peer companies, however due to the widespread impact of the coronavirus outbreak we expect that other companies are experiencing abnormal conditions as well.

What happens during the “Liquidity Event”?

How long does a “Liquidity Event” last?

A Liquidity Event can last up to 90 days. If the Liquidity Event is remedied, we will let you know by email that normal operation of the platform has resumed. If we are unable to remedy the Liquidity Event within this period, a Resolution Event will be declared.

Can I access funds in my holding account?

During a Liquidity Event, you will be free to withdraw any funds already in your holding account however, we will temporarily stop payments of principal and earned interest into your account and we will restrict your ability to withdraw money already in use on the platform.

If I have unmatched funds on the market can I cancel these lend orders?

Unfortunately during this period, you will not be able to cancel any open Lend Orders you may have.

If my funds are repaid early will I be able to withdraw them?

During a Liquidity Event all repaid funds may automatically be reinvested, as such these will not be available to withdraw.

How do I update my reinvestment settings to set them not to reinvest?

As per clause 7.4.1. of our Investor Terms, during a Liquidity Event, we have the option to switch your reinvestment settings on (if they are not on already), so all capital and interest repaid by borrowers is automatically placed into new Lend Orders.

If you get large borrower repayments, will the Liquidity Event be stopped early?

Large borrower repayments do not ensure the remedy of a Liquidity Event.

Will this affect the ‘Estimated Time to Match’ for funds that are locked in?

As you will have experienced under ‘normal market conditions’, the ‘Estimated Time to Match’ has varied, which is dependent on the number of borrower drawdowns and length of funds in the queue waiting to be matched.

Am I at risk of losing money in a Liquidity Event?

Regardless of the Liquidity Event, investments made through Growth Street are not covered by the Financial Services Compensation Scheme (FSCS) and therefore your capital will be at risk. Business-to-business lending is not regulated by the Financial Conduct Authority, so if you are investing as a company or limited liability partnership, your investment will not be subject to the protections applicable to a regulated investment.

Will I still earn interest on my matched investments?

Yes. If your investments are matched to borrower loans then you will still earn interest on your investments during the liquidity event. You will not be able to remove your earned interest to your holding account during the liquidity event.

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