A pool of consumer loans is collateralizing the LendingPoint 2021-B Asset Securitization Trust, a transaction that will offer $400 million in notes to investors. The trust will adhere to a more conservative charge-off policy when determining when certain forms of credit enhancement apply.
In terms of LendingPoint’s approach to addressing charged off accounts, the trust will rely on an older benchmark. In June 2019 the company extended its charge-off window to 181 days past due from 121 days, believing that the longer timeline allows them to recover 10% more loans, according to Kroll Bond Rating Agency.
LendingPoint 2021-B, however, uses the old 121-day cutoff as a default definition when determining requirements for overcollateralization and cumulative net loss (CNL) triggers, KBRA said. The rating agency added that it relies on the more conservative charge-off definition to develop its loss-timing curve for the transaction.
Credit Suisse and Guggenheim Securities are the initial note purchasers on the deal, for which LendingPoint LLC is acting as sponsor and servicer, KBRA said. Vervent, Inc., a company that has been in business for 30 years, is the backup servicer for the transaction.
The underlying loans have a weighted average (WA) coupon of 21.1%, a WA original term of 48 months, and WA seasoning of just two months. Borrowers have a WA FICO score of 664.
LendingPoint also has the ability to substitute or repurchase a defaulted or charge-off loan, but only if the exchange happens within 30 days from when the loan became troubled.
In one credit challenge, KBRA noted that up to 40% of the trust’s total receivables balance could be acquired during the prefunding period of 90 days after the closing date. As of the closing date, the transaction is expected to have about 19,880 loans, representing a collateral balance of about $253 million in receivables. Assets acquired during the prefunding period must comply with certain eligibility criteria, and concentration limits. The criteria limits include a minimum of 25% renewal loans, plus be LendingPoint grade and have a minimum weighted average interest rate of 20% annually.
KBRA expects to assign ‘A-’ to the $278 million class A notes; ‘BBB-’ to the $41.1 million class B notes; ‘BB-’ to the $63.1 million class C notes and ‘B’ to the $16.8 million class D.
