Fred93 blog - Prosper.com is near bankruptcy

[Urbi_et_Orbi]

Good.  Keep her busy communicating directly with a bunch of individual lenders.

 

[christoofar215]

...becoming subject to a bankruptcy or similar proceeding.

What proceedings are similar to bankruptcy?

A wind-down---which is what happens when a VC company that's mostly run off capital injections burns through all of its cash but isn't sitting on a mountain of debt (so outside creditors have claim to very little).   It's up to the VC partners then what to do.


AFAIK, Prosper didn't go out and borrow tons of money (because nobody would lend it to CL).   Prosper probably just has your run of the mill corporate small business debt but the loans are not part of that.   That's "committed cash" which just flows through Prosper but legally that money has to be distributed to lenders.

The VC injections are just that--injections by the "real" owners into the business.  They aren't creditors, either.   In a wind down CL would be stepping aside while the physical assets of the company are sold off (desks/chairs).   Prosper loses its office lease and then the platform has to be taken over by a custodian.   Because there's a bunch of different versions of the Lending Agreement floating around, it remains to be seen what realistically becomes of all the loans ex-post-bankrupt-o.I dunno, maybe I'm wrong.    There's the whole question of the secondary market as well.   Another big nightmare.

[Fred93]

AFAIK, Prosper didn't go out and borrow tons of money (because nobody would lend it to CL).   Prosper probably just has your run of the mill corporate small business debt but the loans are not part of that.   That's "committed cash" which just flows through Prosper but legally that money has to be distributed to lenders.

The quarterly report says there's $1.7M of liabilities (including accounts payable, long term debt, etc), and the most recent investment from  Nigel Morris took the form of a "bridge loan".  This loan is intended to be converted to stock when a bigger investor comes along.  However if no bigger investor comes along, then Morris' investment is a loan, and they would enter bankruptcy with $1.7M+$1M of liabilities in addition to the "notes" sold to the lender members.  

Of course that $1.7M number was as of Sept 30, 2009.  Might be higher now.

So yea, you're right, they didn't borrow "tons" of money, but they do have nontrivial liabilities.

[112233]

bridge to nowhere

[moremoneymarc]

What would be the "canary in the coal mine" first indicator of imminent disaster?  Would there just be a bk filing or would bank withdrawals cease without warning preceeding a bk?   is claw back of transferred money for a time period a concern?

[The_Cat]

What would be the "canary in the coal mine" first indicator of imminent disaster?  Would there just be a bk filing or would bank withdrawals cease without warning preceeding a bk?   is claw back of transferred money for a time period a concern?

Marc,

We have already seen canary indicators IMO. The actions to censor first adopters, the actions to purge any transparency. The whole SEC mess. The inflated return claims. Turnover at the senior leadership levels. I could go on but it is clear to me this is a company which could close at any moment without warning and I don't need to see the financials make this statement. The actions of the company appear increasingly desperate.

[onthefence]

What would be the "canary in the coal mine" first indicator of imminent disaster?  Would there just be a bk filing or would bank withdrawals cease without warning preceeding a bk?   is claw back of transferred money for a time period a concern?

Taking out loans using the lenders loans as collateral.