Generally, in the market, Managed Investment Schemes and second tier lenders have obligations to report their non-performing loans to the Australian Securities and Investment Commission (ASIC) as well as to their investors. These obligations fall within the legislation for reporting net tangible assets (NTA’s) to government authorities. This has brought opportunity to Equity & Co to develop lending products for non-banks to solve insolvency issues due to these circumstances arising where the lender is in default of its obligations because the borrower is in default with the lender.
Equity & Co brings a pioneering opportunity to allow discounts to a potential corporate borrower due to the fact that a first mortgagee will sell its loan at a discount to allow Equity & Co to buy its security and take the non-performing loan back into a performing loan by selling its security.
The legal mechanism of dealing with a non-performing loan is by a deed of assignment by debt and security.