This month however, Dragonfly Property Finance, Tiuta Plc and West One Loans were all willing to give Bridging & Commercial an insight into their loan redemptions, with Dragonfly having redeemed £12 million; Tiuta having redeemed £10 million and West One Loans having redeemed just under £4 million worth of loans during June 2011.

Each one of these lenders noted that whilst the value of their redemptions was business sensitive, they were willing to share the figure as it gave a clearer picture of their health and positioning in the market.  

“Most lenders will not provide redemption figures as this is a tangible and true indicator of how their loan book is performing.  The lower the redemption, the lower the churn rate of funds in and out, which ultimately affects the lender’s overall profit,” said Steven Nicholas, CEO of Tiuta.

Others argued though that the redemption figures shed little light on the true strength of the lenders in question, nor on the quality of the loans lent, as they did not stipulate how the loans were redeemed or whether they had been extended. 

That being said, this rare insight into values which are so infrequently publicised must be a positive sign that the majority of determined exit routes are being realised and that they remain key to most lenders.

Andrew Bloom, Director of Masthaven, said: “For a loan to be redeemable, it is absolutely paramount that there is a clear, realistic and straightforward exit route in place. For example, if the exit is to be the sale of the property, we would need to ensure that the property is going to be attractive to buyers and without defects at the sale date.”

Explaining how Dragonfly ensure that the maximum proportion of loans are redeemed, Jonathan Samuels, CEO, added: “It all starts with underwriting the deals correctly from the very beginning and forming a viable exit strategy. This is vitally important in bridging finance and we place a lot of importance on the exit.”

Yet as vital as the exit strategy may be, we would be naive to assume that this would be sufficient proof of guaranteed on-time redemption. In fact, the overall consensus from the lenders was that contact, throughout the loan term, was fundamental.

 Stephen Wasserman, Director of West One Loans, explained: “The importance of actively managing a loan cannot be understated. We maintain regular contact with both borrower and broker and assist where possible to ensure that the intended exit route happens within the term of the loan. This is achieved via letters and telephone calls with all related parties.”

Alan Margolis, head of bridging at United Trust Bank, added: “I cannot speak for all lenders, but at UTB most of our loans are redeemed through the exit route agreed at the initial stages. Ongoing dialogue with the borrower is key to ensuring this, and consequently we will contact each borrower in the months preceding the end of the loan term to check that everything is going according to schedule and to assist them where things may have gone wrong.”

This ongoing contact with the borrowers was, according to most lenders, the best way to ensure that in instances where the initial exit strategy fell through, a suitable alternative route was arranged for in the borrower.

These alternative options included an extension of the loan term or advice as to a possible alternative exit strategy e.g. sale of a different property in the portfolio or a different funding line.

Each and every lender to which we spoke agreed that repossession, relocation and sale of a property due to a loan default was a last resort and noted using every option available to them before resorting to this course of action.

The latest redemption figures, as well as off the record feedback from other lenders mentioned above, seem to support this sentiment, and whilst we cannot know whether these lenders were reporting the redemption of ‘good’ or ‘bad’ loans, the rare news of such high levels of redemptions in the bridging market is surely another proof of its ongoing strength.

By Katie-Jill Rowland