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
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.
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.