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LendingClub gets ratings boost in new $304M consumer loan ABS

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LendingClub has garnered improved ratings in its latest securitization of unsecured consumer loans, a pool featuring a higher proportion of prime borrowers and additional credit enhancement compared to its prior deal.

According to a presale reports, the $304.42 million Consumer Loan Underlying Bond (CLUB) Credit Trust 2019-P1 pools a greater proportion of higher-graded “A” and “B” loans from the San Francisco-based marketplace lender’s internal scoring tiers.

Nearly 32% of the new collateral is from the highest-ranking prime borrower base served by LendingClub, compared to 23.76% in February’s $268.6 million Consumer Lending Receivables Trust (CLRT) 2019-A transaction. In addition, the CLUB transaction excludes loans from the fintech's lowest-tier “E” class of near-prime loans, which made up more than 10% of the CLRT deal pool.

Even with improving underlying credit quality, LendingClub (NYSE: LC) chose to boost credit enhancement with the CLUB deal, shifting support levels to 38.84% on the $187.7 million Class A note tranche from the credit from 33.9% for the senior-note class in CLRT 2019-A.

Kroll Bond Rating Agency assigned a preliminary A+ rating to the notes, up from A- in the prior transaction. The $36.9 million in Class B notes also were rated higher at BBB rather than BBB- in February.

In addition to higher ratings, Kroll also has a lower base case loss range for the new deal compared to the CLRT offering, with losses expected between 11.6%-13.6%, down from 12.6%-14.6% in the prior deal.

Moody's Investors Service, which did not rate the CLRT transaction, has a 16% cumulative net loss projection for the new bond offering. The agency assigned a preliminary A3 rating to the Class A notes and a Baa3 to the $36.9 million Class B notes. Its expected losses are higher at 16%.

The $45 million Class C notes are rated only by Kroll, with a BB rating.

The loans in the new pool average $17,756, with weighted average original terms of 49 months at 13.94% APR (among the lowest of prior CLUB transactions). The loans are seasoned one month.

The light seasoning factors into the deal’s dearth of Class E loans, a product that LendingClub announced in May it was eliminating for new borrowers.

This transaction is backed solely by loans whose origination has been facilitated by the LendingClub Platform under its prime program. Prime borrowers must satisfy certain criteria, including having FICO scores of at least 660. But Moody’s notes these are “highly levered” borrowers already, with more than 60% indicating their loan’s purpose was debt consolidation.

The new deal is LendingClub’s 10th rated securitization, and the seventh involving its own self-sponsored platform after previously acting as a matchmaker between borrowers and lenders. LendingClub usually offers three- to five-year unsecured loans from $1,000 to $40,000 in its standard prime program and up to $25,000 for its near-prime borrower base, according to the presale reports.

For its “super” prime customers, the loans are up to $40,0000 for three years.

Since beginning operations in 2007, the LendingClub Platform had facilitated approximately $47.2 billion in loans through 1Q19. Loan originations in 1Q19 were $2.73 billion, down approximately 6% from 4Q18 and up 18% compared to the same quarter last year.

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