Lendmark Financial Services is taking a deeper dive into the lower-scoring tiers of its subprime borrower base in its second asset-backed transaction of the year.
Lendmark, an indirect subsidiary of The Blackstone Group, is marketing $250.2 million in bonds backed by a portfolio of $282.7 million in subprime, high-cost personal loans for its Lendmark Funding Trust 2017-2 transaction.
The collateral consists of 62,080 mostly secured loans with an average interest rate of 27.42% on balances of $4,553 to consumers with average Beacon scores of 621. The pool includes a two-year revolving period which could cause some fluctuation in the credit-risk parameters as of the pool's cut-off date.
More than 13% of the loans in the pool are to borrowers with origination scores below 549 on Equifax’s proprietary Beacon scoring system, according to a presale report from bond rating agency DBRS. That compares with just 1.3% in Lendmark’s first pool this year in June. (Beacon scores range between 300-850, mirroring that of the FICO model).
Only 7.69% of the loans went to consumers with Beacon scores over 700, compared with 25.25% in Lendmark’s 2017-1 transaction, the report states.
The new deal consists of mostly secured loans: 39% of are hard-secured by titled assets such as autos, and 55.6% by other secured consuner goods such as furniture, computers, home improvement and furnishings, etc. While the pool allows a 30% concentration of unsecured loans in the pool during the revolving period, the initial unsecured portion is just 5.93% of the pool.
DBRS expects to assign an AA to the $209.7 million tranche of senior Class A notes to be issued, which benefit from credit enhancement of 26.8%. That's in line with prior Lendmark deals. Lendmark has completed three prior securitizations of personal loans since Blackstone bought the company from BB&T in 2013.
Lendmark originates and services mostly direct loans through its multi-state branch network as well as direct mail. Those branches includes the former Springleaf Holdings network of consumer loan offices that Springleaf divested from in 2015 as part of its own acquisition of Citigroup's OneMain Financial. The former Springleaf offices were later incorporated and rebranded into the Lendmark footprint.
Lendmark’s managed portfolio of $1.8 billion includes more than $1.2 billion of loans acquired from Springleaf in the merger.
DBRS has assigned an assumed charge-off rate of 10.05% for the collateral; this is based on the charge-off range of between 5-12% for Lendmark’s overall portfolio. The charge-offs assume no recoveries from unsecured or "other secured" loans and 10% on hard-secured loans.