Consumer lender LendingPoint Consolidated is sponsoring a $170.9 million securitization of point-of-sale loans originated through its network of merchants, mainly in the elective medical and home improvement businesses.
About 85.7% of the loans securing the LP LMS 2023-1 Asset Securitization Trust, are standard amortizing loans, according to analysts at the Kroll Bond Rating Agency in a recent pre-sale report.
The medical and home improvement sectors contribute about 83.6% and 13.7% of loans to the pool, respectively, KBRA said. Other industries account for a combined 2.7% of the pool.
LendingPoint's so-called same as cash (SAC) loans have promotional periods ranging from six to 24 months. During this time window interest does accrue, but interest payments are deferred. If the borrower repays the principal balance in full by the end of the loan's specific promotional period, then LendingPoint waives the interest. For this securitization the 85.7% portion of standard amortizing loans does include a small amount of (SAC) loans, or 4.7%, that are past their promotional periods. A bigger portion, 14.3%, were within their promotional periods as of Jan. 31, 2023, the collateral's cutoff date.
What that means for this deal, from a credit perspective, is that the trust has about $4.29 million yield supplement overcollateralization (YSOC) to cover deferred interest from the same as cash loans' promotional periods, which KBRA considers a positive.
The YSOC is just one potential positive credit aspect of the notes. For starters, borrowers had a weighted average (WA) FICO score of 680, and were paying 20.7% in interest on the loans, the rating agency said. LP LMS will repay investors through a sequential pay structure, in which the class A notes receive principal payments and will be paid in full before all subordinate notes.
Other forms of credit enhancement include overcollateralization, which is 10.50% of the initial adjusted pool balance, and will build up to a target of 19.20%; a non-declining cash reserve account and 10.33% in excess spread.
The rating agency expects to assign 'A-' to the $122.6 million class A notes, the bulk of the securitization amount; 'BBB-' to the class B notes and 'BB-' to the class C notes.
All of the notes have a legal final maturity of Oct. 17, 2033.
