LendingClub is preparing another securitization of its own consumer installment loans, and this one is backed entirely by prime collateral.

The marketplace lender’s first self-sponsored deal, backed entirely by subprime loans, was completed in June.

LendingClub originally acted purely as a matchmaker, connecting borrowers with lenders over its platform. It did not hold on to the loans. Investors who funded these loans and wanted to turn around and resell them as collateral for bonds were left to their own devices.

That meant the company had no control over how these deals were structured, or when they came to market — even though the transactions’ performance could affect its reputation.

By sponsoring its own deals, LendingClub can provide liquidity to multiple investors. It can also ensure that bond offerings are regular and uniform. This increases the appeal to securitization investors, since they don’t have to spend as much time analyzing each deal.

The loans backing the $363.09 million CLUB 2017-P1 have FICO scores of at least 660; the weighted average is 692. The weighted average coupon is 15.58%

The deal has approximately 50.72% and 49.28% of 36-month and 60-month loans, respectively and is geographically diverse with the top three states based on current balance (CA, NY & TX) representing 31.83% of the collateral pool. (Loans from areas that appear to have been most severely affected by Hurricane and Tropical Storm Harvey make up approximately 3.7% of the collateral pool.)

By comparison, the loans backing CLUB 2017-NP1 had FICOs of 600-659, with a weighted average of 639. To offset the additional risk, they pay higher rates of interest, with a weighted average coupon of 27.26%.

Another change from the previous deal is that LendingClub itself will be contributing 27.66% of the collateral.

The company only recently began holding loans on balance sheet, and it did not contribute any of the collateral for the June deal. The remainder of the collateral for CLUB 2017-P1 was contributed by three third-party investors; by comparison, seven investors contributed the collateral for the June deal.

CLUB 2017-P1 will issue three classes of notes: $244.2 million of class A notes with 38.55% credit enhancement carry a preliminary A- rating from Kroll Bond Rating Agency; $57.4 million of Class B notes with 24% credit enhancement are rated BBB- and $61.5 million of Class C notes with 8.4% credit enhancement are rated BB-.

Kroll expects cumulative net losses to be in the range of 14% to 16%, in its base case scenario.

By comparison, LendingClub had to provide a much higher level of credit enhancement, 52.25%, to secure an A- from Kroll for the senior tranche of CLUB 2017-NP1.

The company continues to narrow losses as it recovers from a scandal last year over operating controls. In August, it reported a net loss of $55.2 million for the first six months of the year, which is smaller than the $77.2 million net loss reported for six months ended June 30, 2016

Cash and cash equivalents have increased from $515 million to $538 million from December 31, 2016 to June 30, 2017 with securities available for sale decreasing from $287 million to $225 million over the same period.
Originations for the second quarter of 2017 of $2.147 billion were higher than the $1.959 billion originated in the first quarter of 2017 and $1.955 billion originated in second quarter of 2016.

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