Securitization was bound to take center stage at some point at the LendiUSA 2015 conference, a gathering of players in the online lending business.
As these platforms grow, many are looking at securitization as a funding source. More than a few have already taken the plunge.
Speaking at the securitization panel, Credit Suisse Director Stephanie Yeh said that so far this year there have been about $1 billion in bonds backed by online marketplace loans, about the same figure for all of 2014.
This is particularly remarkable given that this asset class is still very much in its teething stage. It debuted in late 2013, with a securitization in October of that year from Eaglewood Capital Management, which sourced loans from LendingClub, followed by one in December from Social Finance, the most prolific issuer of public deals to date.
As the market has evolved, large asset managers are getting involved. This year, BlackRock Financial Management, for instance, pooled loans from Prosper Funding’s platform in a $327 million deal issued February 9. Rated by Moody’s Investors Service, that transaction was split into a $252.9-million Baa3’ tranche and a $45.4-million Ba3’ piece.
Nino Fanlo, the chief financial officer of Social Finance, said that a group of large investors will eventually dominate the marketplace sector, purchasing loans to subsequently turn around and securitize them.
But John Bunting, a managing director at Garrison Investment Group, pointed out that there could also be conduit-style deals, with several smaller loan buyers pooling collateral into a single securitization. He said it was risky for platforms to have a buyer base that is too concentrated.