Fred93's blog - Bankrutpcy Postponed

[Mark12547]

Interesting post by Prosper on their blog.

Prosper Blog | February 5th, 2010 at 12:34 pm
We maintain all lender funds in a separate account at Wells Fargo Bank “for the benefit of” our lenders. These funds are not commingled with any of our other assets. If we filed for bankruptcy, we don’t believe these funds would be subject to claims by our creditors.

Well maybe the funds would not, since they are held for the benefit of the lenders but interestingly enough they did not comment about the actual loans.

I had a supervisor at one time who worked out terribly. He would say something that sounded like he agreed with you so you would expect him to act on it, but when you carefully parsed out just exactly what he said, he promised nothing. The not knowing where he stood or even what the current priorities are made it difficult to work for him.

That blog excerpt sounds like the same technique: say something that sounds like our assets are safe, without really saying they are--as you indicated, the lack of mention about the loans. As far as I recall, very few people had questions about the FBO cash account, but big questions on the loans themselves. I know I had raised the question of ownership on the old loans, the agreement saying we own them (unlike the loans after the most recent reopening), but us basically not having any rights of ownership other than the cash stream. Now that we know that the SEC considered those loans unregistered securities, I think their standing is even murkier. As I mentioned  before, I think it will take the bankruptcy judge handling Prosper's bankruptcy to make the final determination, and it is quite possible my last loan won't be concluded when (or if) Prosper goes bankrupt.

[xraider]

You'd think with all of Prosper's high-powered attorneys, if they wanted to figure out a way to ensure that loan repayments are dedicated to lenders, they could figure out a way to do it.....

[Mark12547]

You'd think with all of Prosper's high-powered attorneys, if they wanted to figure out a way to ensure that loan repayments are dedicated to lenders, they could figure out a way to do it.....

Remember: Prosper Marketplace, Inc. doesn't consider us "Lenders" to be customers, even though we are the ones who supply the cash for the loans, make the bidding decisions, and take the risks.

Rather, Prosper considers those who post public messages about ripping off lenders, lie out of their teeth, and have a track record of loan fraud to be their customers to protect and cuddle.

[ira01]

You'd think with all of Prosper's high-powered attorneys, if they wanted to figure out a way to ensure that loan repayments are dedicated to lenders, they could figure out a way to do it.....

+1 -- I've often thought that.  I suppose Prosper just doesn't really care much.  It is kind of like the blender situation -- clearly, Prosper could have implemented a right of set-off long ago.  But they don't care, so they never did.

[pacino58]

I had a supervisor at one time who worked out terribly. He would say something that sounded like he agreed with you so you would expect him to act on it, but when you carefully parsed out just exactly what he said, he promised nothing.

I agree, really if the lenders are allowed to keep their bank accounts which Prosper keeps for our benefit, who really cares if there are no loans paying into that account when Prosper goes bankrupt.

Which is why I transfer out as quickly as I see money in my Prosper account.  I have unlimited ACH transfers since I am in a non-lending state.

[mothandrust]

+1 -- I've often thought that.  I suppose Prosper just doesn't really care much.  It is kind of like the blender situation -- clearly, Prosper could have implemented a right of set-off long ago.  But they don't care, so they never did.

Prosper could use this teetering-on-bankruptcy situation to its advantage by implementing the right of set-off (or offset).

If lenders got to worrying about a Prosper BK, then Prosper would start to originate hedge loans from people that ordinarily would not consider applying for a loan, and considering the income and net worth requirements to be a lender, these would be mostly AA listings.

There are only 261 lenders on Prosper with >25K invested; all the rest could consider hedging themselves if Prosper embraced the idea.

[xraider]

I'm down to about $175 at risk.  Even if I wasn't suspended, I doubt it's worth seeking a loan in that amount.... 

Maybe Chase would let me hedge my Prosper portfolio?   

[havastat]

Wow -- discussing the possibility on their blog. That's a big step.

[christoofar215]

I'm not so sure there's a "search" under way, per se.  Funding may have already been identified and is in the pipeline  - perhaps under negotiations and/or perhaps waiting for the outcome of some event between now and April 1st.  In short, Prosper MIGHT be be closer to additional funding than you kinda implied both here and in the blog.

I've seen this up close several times.  It is almost always a search.  Presentation after presentation to VC after VC.  You are always in discussion with a couple of them, but the discussions don't conclude.  You never know how near or far you are away from closing. 

I'm helping one startup thru this now.  They got some "term sheets" (informal offers) before the big downturn, but when the economy turned down they were all withdrawn.  The company hunkered down and survived, but now is runnin' on vapors.  They've given their pitch to 20 or so VCs and a half dozen rich individuals, but hasn't found the right fit yet.  The process involves more than just finding someone who would like to invest.  Its also about management coming to an understanding about how much he's gonna have to give away.  I know people who would invest, but only at a lower valuation than the entrepreneurs are lookin' for ..  so the process continues. 

The CEO at my firm was entertaining the possibility of splitting ownership to a private investment fund so we could get our hands on a lot of growth capital (we're growing, but not in North America).

Our sales picked up at the end of last year and they're way up for January, so our CEO scuttled the idea and terminated discussions.   But it was fun to see representatives from Credit Suisse and Goldman attend our user conference so they could see some of our users.    Unfortunately, execs of our customers rarely ever visit us.   Mostly senior level field engineers come to visit us on site and all they want to do is talk shop and complain about our bugs and when they'll get fixed.

[kenL]

Interesting post by Prosper on their blog.

Prosper Blog | February 5th, 2010 at 12:34 pm
We maintain all lender funds in a separate account at Wells Fargo Bank “for the benefit of” our lenders. These funds are not commingled with any of our other assets. If we filed for bankruptcy, we don’t believe these funds would be subject to claims by our creditors.

Well maybe the funds would not, since they are held for the benefit of the lenders but interestingly enough they did not comment about the actual loans.

I'm really surprised that prosper posted those comments and responses to their blog. The overall tone of the comments is really negative and anybody with half a brain would see those comments and especially the responses as huge red flags.

[bamalucky]

I love how they answered " concerned". They compltely acted like I asked something else

[bamalucky]

I'll try again with a more abrupt question

You answered the question like I was asking something else.

I'lltry again. Is it fact that the new notes belong to Prosper and could be used to settle other debts in a Bankruptcy?

[Fred93]

I'm really surprised that prosper posted those comments and responses to their blog. The overall tone of the comments is really negative and anybody with half a brain would see those comments and especially the responses as huge red flags.

Well look at it this way.  We've criticized prosper (rightly) for so often hiding anything that wasn't blue sky and daises.  So now they let some somewhat critical comments thru, and you criticize them for that.  Can't have it both ways.

I say great, they're adopting a more open style, as they should have done in the first place.  Don't trash 'em for it.

[cowdog]

It won't be approved, but whatever:

Your comment is awaiting moderation.
Cow Dog | February 7th, 2010 at 5:24 pm

But those “lender funds” in the separate accounts are not owned by lenders since Prosper unilaterally altered terms; those loans are owned by Prosper now.

Lenders wouldn’t get a penny in a PMI bk.

[ira01]

I'm really surprised that prosper posted those comments and responses to their blog. The overall tone of the comments is really negative and anybody with half a brain would see those comments and especially the responses as huge red flags.

Well look at it this way.  We've criticized prosper (rightly) for so often hiding anything that wasn't blue sky and daises.  So now they let some somewhat critical comments thru, and you criticize them for that.  Can't have it both ways.

I didn't read his comment as a criticism -- just surprise.

I say great, they're adopting a more open style, as they should have done in the first place. 

Nah -- the blog has often been somewhat schizophrenic, as it is apparently moderated by several different people.  One lets more stuff through than the others.  I wouldn't really characterize that as "adopting a more open style."