Eurocent insolvency: Mintos handles ‘Will buyback guarantee work?’

Eurocent is on brink of bankruptcy. What will happen to our loans on Mintos? Will Buyback guarantee work? Mintos informs investors of possible resolution to investors on late July 2017.

Who is Eurocent?

Eurocent Spólka Akcyjna is a financial institution founded in 2004 from Poland who offers cash loans and monthly loans to individual customers.

One of loan originators on Mintos.

Timeline

December 2016: Eurocent had their pitch with Mintos.

17 March 2017: Mintos introduce Eurocent to the platform.

26 June 2017: Mintos suspends all new Eurocent’s loans and secondary market.

27 July 2017: Mintos informs investors possible resolution in case of Eurocent’s bankruptcy.

Screenshot: Newsletter on 27 July 2017 – Mintos

This is the first case in P2P lending where a loan originator goes into insolvency. Eurocent does not have enough cash to pay out its bonds to investors And investors who have Eurocent-issued loans in their portfolio raised to many questions on it.

Mintos calms investors down by being openly talk about the issue and suspending new loans and secondary market from Eurocent to protect investors on their platform. Investors in a P2Pindependent forum highly appreciated the way Mintos handle the problem.

Some said their Eurocent-issued loan has been paid back – which is consistent with Mintos‘s announcement that Eurocent continued to pass the repayments to Mintos investors.

Screenshot: Investor’s comment about Mintos

The ultimate question that concerns every investors who holds Eurocent loans in their portfolio: Will auto buyback guarantee be activated?

Another investor raised the question reagarding his 250 euro loan and here is the Mintos‘s answer:

Screenshot: Buyback guarantee in case of bankruptcy – Mintos

This is where we see how much the ‘real’ buyback guarantee is worth in case of insolvency – ZERO. 

But okay, that is our risk to lose money in such a case, we accept it at the beginning. I personally don’t have any Eurocent loans but it is good to learn from this case to prepare for the future (if it happens again with other loan originators)

Eurocent has financial problem since 2016

I did a bit of research and found out that Eurocent financial position was not healthy since 2016 until early 2017. You can read full report 2017 by Morningstar here

Screenshot: Report on Eurocent – by Morningstar 2017

My quesion after reading this report was “How is it possible with this financial situation Eurocent made their way to Mintos platform?”

Then a bit more research, I found Eurocent pitch deck for Mintos in Demcember 2016. I want to see if Eurocent reported truthfully on their situation or not. And what I found after a quick look:

  • Eurocent pitch deck focus was talking about how their product worked, customer segments, policy, loan issue procedure, debt collection process less about insights of company performance.
  • Eurocent reported similar number to Mintos compared to third party report.
  • 1 slide about financial situation and it is quite misleading.

Screenshot: Eurocent report on Financial data – on Mintos. See FULL pitch deck here

Sure, we see the all the decrease in revenue and net profit. However the thing is the true performance story is not told by percentage, where we would we negative numbers and stop and thinking. All the postitive numbers here are misleading and have such positive effect to our brain where we do not see much of the real story.

What do you think if the number is interpreted in this format?

Screenshot: Eurocent Profitability – Morningstar 2017. Full report here

Lessons from Eurocent case on Mintos
  • Limit your exposure to loan originators.
  • Do your own due diligence or simply a bit of research before setting your  terms on auto-invest portfolios.
  • Uncheck the loan originators with financial health problems.
  • Buyback guarantee works fine until the guarantor runs into insolvency.
  • Open communication when crisis arises will turns the table around, gain you trust from the public – for Mintos.
  • Mintos may want to be more careful when taking new loan originators without sacrifice of trust from investors for large number of compeitive loans.

Hope you enjoy this article. We love to hear your thoughts you on this story. Shoot us a message or comment.

Happy investing.

 

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