Sure Peter, there will be defaults, but in PWCC’s case it’s no big deal and could actually be a windfall - they hold the collateral, which is only leveraged at 50%, and they have the vehicle to immediately monetize the collateral (their auction) and make up the debt l, plus costs. And here is the best part - they make 8%-12% of the sale at their auction (“cost”). So a default could actually be good for the “lender” not bad...
I really like the post by the guy in the securities market - I never considered the market effect of defaults, calling of loans, etc. It could rock the industry, but that’s a whole different matter (but one well worth considering as well)
|