Trio of consumer lenders launch first 2020 ABS deals
Despite expectations of forthcoming pandemic-related troubles in securitized consumer loans, three lenders are issuing their first asset-backed transactions since the outbreak of COVID-19 in the U.S.
New York-based Liberty Lending is offering a $121.53 million bond package backed by a pool of loans it has underwritten for debt-relief purposes.
Meanwhile, Upstart Network is sponsoring a $65.54 million asset-backed deal of online loan originations being repurchased from Goldman Sachs, and specialty consumer finance company Regional Management Corp. is marketing a $180 million transaction backed by large-sized consumer loans originated through its network of Regional Finance branches.
The deals will add to a year-to-date volume of $6.4 billion across 22 securitizations by consumer and marketplace lenders.
The LL ABS Trust 2020-1 transaction includes three classes of notes: a Class A tranche totaling $81.11 million, a $17.21 million Class B tranche and a $23.21 million Class C tranche.
Kroll Bond Rating Agency has assigned preliminary A ratings to the Class A notes, a BBB to the Class B bonds, and a BB- to the Class C notes. The Class A notes benefit from an initial 41.6% credit enhancement.
While Liberty offers both debt consolidation and debt relief programs, the loans pooled into LL ABS Trust 2020-1 include only those from its express settlement loan product that the company offers to consumers enrolled in a debt relief program administration by National Debt Relief LLC – a firm with common ownership with Liberty Lending.
The settlement loans in the pool are fixed-rate, fully amortizing unsecured loans with an average balance of $15,284 (maximum $55,403), with original terms average 47 months (ranging from 13 to 65 months) at an average interest rate of 21.06%. The average FICO score at origination is 558, with current average FICO of 643.
The transaction is the second for Liberty since its debut securitization in 2019.
The loans are funded and originated by a Utah-based partnering institution, FinWise Bank, which has worked with Liberty since 2016.
Upstart’s 12thsecuritization of will raise funds for the acquisition of loans originated on Upstart’s online platform (via New Jersey-chartered banking partner Cross River Bank and FinWise Bank) and currently held by Goldman Sachs Asset Backed Securities Corp.
The proceeds from Upstart Securitization Trust 2020-2 will be raised from the sale of a single Class A tranche of notes with BBB- ratings from Kroll, and benefiting from 28% credit enhancement.
The Class A tranche carries a lower rating than its previous deals that included a senior-note offering with an A- rating. The CE is more than double Upstart’s previous deals.
The Upstart pool will include 8,346 loans with a total balance of $95.82 million, with a weighted average coupon of 15.47%. The weighted average borrower FICO is 687 on original average terms of 53 months. The loans are seasoned an average of 8 months. Approximately 70% are 60-month loans, with the remainder from the 36 month program. Unlike previous transactions, Upstart is excluding 84-month loans from the deal.
Upstart’s originations have fallen dramatically in due to disruptions in the coronavirus disruptions in the capital markets, with the company reporting only $109 million in program originations in the second quarter compared to $1.04 billion in the first quarter, according to Kroll. But July originations increased to $208 million.
The company’s active modifications for payment deferrals and reliefs during the COVID-19 crisis peaked at 5.6% of its managed portfolio in May 2020. The temporary relief program ended June 4, with 94% of borrowers granted forbearance having made at least one monthly payment since. Approximately 15% are delinquent (1-30 days past due) and 12% have enrolled in a loan modification plan.
Regional (NYSE: RM) will sponsor four classes of notes in Regional Management Issuance Trust 2020-1, its fourth securitization since 2018 of loans issued through its 368-branch Regional Finance chain.
The largest being a Class A tranche totaling $134 million. The notes have preliminary single-A ratings from S&P Global Ratings and DBRS Morningstar, and benefit from 29.5% credit enhancement.
The pool is secured by personal consumer loans totaling $187 million issued through Regional’s decentralized branch network with locations concentrated in 11 states. (Regional is headquartered in Greenville, N.C.).
Within Regional’s $1.1 billion managed portfolio, about $553 million are the company’s “large”-loan holdings of accounts with original balances greater than $2,500 and annual APRs up to 36%. These are the only loans included in the pool, according to ratings agency reports.
In a company announcement last week, Regional stated its 30-plus day delinquency rate was 4.6% as of Aug. 31, up slightly from 4.5% in July but down from June’s 4.8% rate. About 1.6% of loans had been deferred or renewed under borrowers’ assistance programs during August.
The Regional 2020-1 deal is underwritten by Credit Suisse and Wells Fargo.