By Redebt IP Limited May 2023
Redebt offers an entrepreneurial opportunity in relation an online insolvency claims trading platform. Redebt’ s unique abilities, resources and core technologies include the ability to aggregate holders of insolvency claims and buyers of such claims on a single online platform. The platform uses specially designed secure software to create an online marketplace where buyers and sellers of insolvency claims meet, sell and settle insolvency claims. Redebt’ s website facilitates claim holders to upload relevant claim documentation, buyers to access such documentation for due diligence, bid for claims and automated legal settlement documentation. The Redebt website also facilitates know your customer checks. It is anticipated that the Redebt platform offers value to various stakeholders including hedge fund managers, distressed investors, insolvency practitioners, broker dealers, claim holders and professional advisors such as lawyers and accountants.
Until now there has been no readily available infrastructure in the UK to support online trading of insolvency claims. Transactions are undertaken over the counter (OTC), which constrains liquidity and price discovery. Whilst there are a handful of online secondary debt trading platforms in startup stages, there has been none which facilitates online trading of insolvency claims.
Insolvency claims are claims held by creditors against a company which has filed for insolvency such as administration or liquidation. Redebt is a start-up limited liability company incorporated in the UK and founded by Henry Kikoyo, a UK Solicitor with 15+ years’ experience in distressed debt and claims trading, and cross border insolvency. Redebt’ s tacit knowledge in claims trading, in particular that of its Founder and partners is a significant driver of its business strategy and success.
According to reports from the Insolvency Service (an agency of the UK Government responsible for insolvency matters) insolvencies in the UK are on the rise, as shown from the graphs below. This offers opportunities for trading of insolvency claims.
Number of insolvencies in the top five sectors in 2022, England and Wales, 2012 to 2022
Sources: Insolvency Service (compulsory liquidations only); Companies House (all other insolvency procedures).
All industries saw increased insolvency numbers in 2022 compared to 2021, as shown in Figure 6. For the larger sectors (those accounting for at least 5% of insolvencies), increases ranged from 31% in Professional, scientific and technical activities to 89% in Wholesale & retail trade; repair of vehicles.
The total number of registered company insolvencies in 2022 was higher than 2021 and higher than recent pre-pandemic levels.
Source: Insolvency Service©,UK
Redebt offers a gold mine opportunity for an online market for buyers of insolvency claims and quick win for sellers, who are able to sell their claim rather than wait for the resolution of corporate insolvencies.
Like any new start up, there are risks and uncertainties trading on the Redebt platform. Firstly, neither Redebt nor its directors and employees are authorised to give investment services or legal services. Redebt is neither authorised by the Financial Conduct Authority nor the Solicitors Regulatory Authority, to give investment services or legal services, respectively. Users are therefore encouraged to take independent financial and legal advice. For example, claimholders who are seeking to sell their claims have to independently determine the price at which they sell their claims, which is likely to be well below the par value of the original claim. How that price is arrived at is for the claimholder to determine or seek advice from its financial advisor. Similarly, buyers of claims too not only have to make a bid price but also to undertake independent legal and financial due diligence on the claim.
Unlike the US, where insolvency claims are filed centrally in the bankruptcy court, in the UK information on claims if often procured from the insolvency practitioners. The insolvency practitioners prepare a statement of affairs, from which the market value of the assets of an insolvent company at the time of default may be procured. The insolvency practitioner administering the affairs of an insolvency company is obliged to prepare and file reports at the UK Companies House. These reports are expected to include statutory information about the company and crucial information on the events leading to default, the final outcome, details on creditors’ recoveries, and information on the insolvency costs and expenses.
Given the above, Redebt does not encourage individuals (other than corporates) to use the trading platform except those that are high net worth (i.e. have a net worth in excess £500,000) or sophisticated investors.
Redebt’ s has a continuous innovation strategy, and its technology will evolve over time with new investment. This also includes interface with the regulators to ensure visibility and transparency on its activities. Hopefully users find Redebt a valuable platform!