Moody’s Investors Service, which rated Citigroup’s previous three securitizations of unsecured consumer loans originated by Prosper Marketplace, is conspicuously missing from the newest offering.
The $278.39 million transaction, Citi Held for Asset Issuance 2016-PM1, is being marketed a month after Moody’s put three of Citi’s previous deals under review for a potential downgrade, citing higher levels of missed payments on the loans than it had expected.
Instead, the latest deal is being rated by Fitch Ratings, which was also on the previous deal, and by Kroll Bond Rating Agency.
Citi did not immediately return a call seeking comment. Thomas Lemmon, a spokesman for Moody’s, would say only that the firm was not asked to rate the latest transaction.
The deal comes as investors in the market for online loans have started to grow anxious about rising delinquencies, increased competition among originators and thinning yields.
The transaction will consist of three tranches of notes: the $212.33 million senior class A notes, which benefit from 33% credit enhancement; the $24.85 million class B notes with 25.1% credit enhancement; and the $41.21 million class C notes with 12% credit enhancement. All of the notes have a final, legal maturity of April 2025.
Compared with Citi’s previous securitization of Prosper loans, total credit enhancement is 13.5 percentage points lower on the class A notes and 1.4 percentage points on the class B notes; according to Kroll, this is due to less subordination for each class. Credit enhancement on the Class c notes is the same.
Perhaps as a result, Fitch has taken a slightly less rosy view of each of the tranches; it expects to assign an ‘A-‘ to the class A notes, two notches lower than the 'A+' it assigned the comparable tranche of Citi's previous deal; Kroll came in at 'A.'
Fitch expects to rate the class B notes ‘BBB-‘ compared to 'BBB+' for the previous deal and the ‘BBB’ from Kroll.
It expects to rate the class C notes ‘B,' down from 'BB-' for the previous deal but on par with Kroll's 'BB-'.
The unsecured consumer loans collateralizing the notes were originated and serviced through Prosper’s online lending marketplace platform and purchased by CIGPF I, an indirect, wholly owned subsidiary of Citigroup.
All are unsecured, fixed-rate, fully amortizing consumer loans that have either 36- or 60-month original loan terms. The weighted average FICO score of the borrowers is 704 and weighted average interest rate is 13.57%.
Fitch expects weighted average gross defaults for the pool to be 11%.
On Feb. 11, Moody's put 'Ba3' rating on the class C notes of three deals under review, saying that late payments and charge-offs were occurring faster than it had anticipated. The rating agency now expects lifetime net losses on the pools of loans backing the three deals to reach 12% of the original balance, up from an earlier forecast of 8% to 8.5%.
Correction: An earlier version of this story incorrectly stated that Fitch rated three previous Citi-Prosper deals. It only rated one before the current offering.