Updated: 4 November
Mintos have disclosed how much they expect investors to lose on defaulted loans
Mintos recently hosted an ‘ask me anything’ event with Dmitry Amelin, their Debt Collection Manager, and Janis Pranevics, their Head of Loan Originator Partnerships. A replay is available on Youtube, which we have linked to opposite.
For the first time (that we are aware of), Mintos has provided recovery forecasts for many of the loans that are in default. They also provided significantly more information about the status of many key loans in default, such as Finko (Varks), Cashwagon, and Monego.
We have provided below a summary of the key information made available on the call, as we think it will be of interest to many investors, and it has not been published on the Mintos site. If there is sufficient interest, we may keep this page updated in the future once new defaults emerge and more information becomes available (let us know in the comments below).
Overview of Mintos loans in default
|Loan originator||Exposure at default €m||Recovered €m||Status||Mintos recovery forecast||Assumed recovery||Assumed loss €m||Final payment expected||Comments|
|Capital Service||19||0.5||Repayment plan agreed||<100%||70%||5.7||2026-28||An initial repayment plan has been agreed but full recovery will require further negotiations|
|ExpressCredit||5.3||1.9||Negotiations||100%||75%||4.0||Dec 21||Mintos says it is hoping that other members of the ExpressCredit group will provide support. 100% recovery seems optimistic|
|Monego||9.5||2.4||Liquidation||?||50%||4.7||?||Mintos has guided towards a 70% recovery but we expect less. There is a large potential tax bill, and recovering loans will be difficult due to the loss of licence by Monego. In addition, operating costs and administrator's bills will cut into the proceeds paid to investors|
|Akulaku||20.8||10||Repayment plan agreed||100%||100%||0||2021||The Akulaku default was not expected. It has since been making repayments and is expected to repay all amounts due by the end of 2021|
|GetBucks ZM||3.7||0||Negotiations||?||50%||1.8||Dec 21||GetBucks Group is attempting asset sales to raise funds to repay Mintos investors. However the situation seems to be extremely distressed and have doubts that a full recovery will happen|
|GetBucks BW||7.4||1.7||Negotiations||100%||50%||3.7||?||Mintos says that the company is 'cash strapped' and they are seeking to negotiate a payment schedule|
|Kredit24||0.4||0.2||Wind down||100%||100%||0||May 21||An orderly wind down is expected to result in a full recovery for investors|
|Eurocent||0.2||0||Insolvency||0%||0%||0.2||?||Mintos have not explained why zero recovery is expected, but it is not a surprise|
|Aforti||2.2||0.3||Litigation||?||75%||0.5||?||Recovery is likely to take several years unless Aforti management agree to negotiate a restructuring plan|
|Rapido Finance||0.4||0||Liquidation||0%||0%||0.4||?||Mintos has not explained why zero recovery is expected.|
|Cashwagon VN||6.4||1.4||Liquidation||40%||40%||3.8||?||Company was closed down by Vietnam authorities. Likely to take a long time to recover funds|
|Cashwagon PH||1.9||0.2||Wind down||20%||20%||1.5||?||Being wound down after failing to find secure new investment into the group|
|Cashwagon ID||1.1||0.4||Wind down||40%||40%||0.6||?||Being wound down after failing to find secure new investment into the group|
|Finko UA||16.8||5.3||Wind down||100%||80%||3.4||?||Ukraine companies are being wound down. Difficult conditions in the country. Mintos is hoping to receive 'extra security' from members of the Finko group. A full recovery seems optimistic but possible|
|Finko AM (Varks)||27.4||10.5||Administration||70%||70%||8.7||Dec 22||Extremely messy situation. War in Armenia has impacted collections. Recovery rate has been cut from 100% to 70% by Mintos. Would not be surprising to see it cut further|
|Dziesiątka Finanse||1||0.4||Restructuring||100%||100%||0||2021||Has now agreed a repayment plan with Mintos|
|Alex Credit||4.4||0.1||Workout||<25%||20%||3.5||2022||A collection agency has been appointed to recover payments|
What caused the defaults?
We have seen several consistent reasons behind why loan originators have defaulted. While COVID-19 is an obvious one, it should only be attributed in some cases. Other frequent reasons include regulatory breaches, sub-scale operations and the introduction of local laws that damaged the business models of some businesses. We think that analysing past failures can be a good way of avoiding ones in the future. To help with that we have provided a summary below of what the key reasons were behind each default.
|Loan originator||COVID19 impact||Regulation breach||Subscale operations||Weak financial position||Unexplained factors||Poor management||Country specific issues|
|Finko - Varks||X|
|Finko - Ukraine||X||X||X|
16% of loans outstanding are defaulted
The total amount of loans classified by Mintos as being in default is just under €100m. That’s over 16% of loans outstanding. Unsurprisingly, many investors are not happy with this situation. There are many situations now where Mintos has very little control over the outcome, because the companies are now controlled by regulators or insolvency administrators. Varks and Monego are two messy situations where we think there is considerable risk that recoveries will be lower than expected, and will take significantly longer than expected.
On October 30 Mintos announced that two ‘unregistered creditors’ had confirmed receiving funds from the Monego administrator. These funds had been sourced from borrower repayments (presumably some of this cash is contractually owed to Mintos investors). This disclosure raises a lot of unanswered questions. Who received the payments? How big were they? What were the payments for? Is the administrator following the law? This highlights again that there are significant risks in these situations, particularly in countries such as Kosovo that are not renowned for having reliable legal, regulatory and political processes.
The two situations with the most urgent and important outstanding negotiations are Capital Service, and Akulaku. Both situations are interesting. Capital Service made a ridiculously bad restructuring proposal to Mintos investors – will they accept the Mintos counter-proposal, or will they keep delaying and playing for time? Akulaku has never properly explained the reason for its difficulties repaying Mintos investors. It had huge cash reserves less than 12 months ago, and Indonesia was less impacted by COVID-19 than in many other countries.
What can we learn?
It is important to learn from failures. LO’s, investors and Mintos itself will need to consider how they can come through the next crisis in a better position. We’ve listed below some of the more glaring problems that have emerged this year below. We would love to hear from you in the comments below what other failures you think we can learn from the experience of 2020.