Finally, Some Good News for Online Lender Avant

Avant, the online lending platform based in Chicago, appears to be back in the good graces of capital markets investors.

The company said Monday it closed two transactions that will help it put more money to work making unsecured consumer loan. A $255 million offering of bonds backed by its loans, launched two weeks ago was well received. The deal was Avant’s first securitization since it shed staff and shelved expansion plans in the spring.

It may have encouraged J.P. Morgan and Credit Suisse to renew a $392 million line of credit that the lender uses to warehouse loans before they can be bundled into collateral for bonds.

In order to woo back investors, Avant boosted the credit quality of loans backing the latest bond offering. The deal also features additional investor protections. Over half the 36,459 loans used as collateral were originated under more stringent guidelines that Avant adopted in April. As a result, the borrower payment-to-income ratio for the deal has improved, to 11.7% from 8.8% for its previous deal, completed four months earlier. The loans backing this deal also have a shorter weighted average life.

Avant also eliminated delinquent loans for the latest pool, unlike the pool of collateral for each of Avant’s deals this year that had up to 1.5% of loans as much as 59 days late.

The company also boosting credit enhancement for the latest deal, partly by increasing the excess spread, or the difference between the interest rate on notes issued by the trust and loans used as collateral. The senior, class A notes benefit from total credit enhancement of 56.85%, up from 49.95% for the senior notes of the April deal.  This additional enhancement did not earn Avant a higher credit rating however. Kroll Bond Rating Agency assigned the same ‘A-’ to the senior tranche of the latest deal.

However, the company said that the deal was “strongly received” by investors and “significantly oversubscribed.”

Credit Suisse served as the lead bookrunner with J.P. Morgan and Morgan Stanley serving as joint bookrunners.

"We tremendously value the strong ongoing partnerships we have with our lead investment banks and are extremely pleased that we had over 30 investors in the 2016-C bond offering, which include many of the largest and most sophisticated global bond investors,” Avant CEO Al Goldstein said in a press release.

He said that Avant will continue to expand and diversify both its on and off-balance sheet funding strategies. To date, the company has raised a total of $659 in equity financing and maintains $1.3 billion of capacity in its debt facilities. In addition to its warehouse facility with J.P. Morgan and Credit Suisse, Avant counts Tiger Global Management, August Capital, Victory Park Capital, KKR, DFJ Growth and RRE Ventures among its equity and debt investors.