Upgrade again taps master-trust platform for 'near-prime' loan mix

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Upgrade, the online lender operated by ex-LendingClub CEO Renaud Laplanche, has concentrated more of its riskier loan products into a third single-series issuance from a master-trust securitization platform the marketplace lender established this year.

Upgrade Master Pass-Thru Trust (UMPT) Series 2019-ST3 is a $30.9 million offering of bonds backed by receivables paid by borrowers holding $45.7 million in online-loan balances.

The new issuance has a higher average interest rate and higher expected losses than Upgrade’s previous master-trust issue in July, due to the inclusion of more “near-prime” loans and a reduction in the proportion of “prime plus” loans in the new pool.

Kroll Bond Rating Agency has assigned a BBB- rating to the Series 2019-3 notes, which have an expected loss range of 15.15%-17.12% compared to $31.7 million UMPT 2019-ST2 issuance with a range of 13.8%-15.8%. The notes are supported by 32.5% credit enhancement.

Upgrade’s highest rated “prime plus” loans make up only 2% of the pool compared to 12% in UMPT 2019-ST2.

The pass-through notes sold in the master trust are backed by more risk-laden pools than those for Upgrade’s standard securitization platform. The 29.9% share volume of the lower quality near-prime loans in both the UMPT 2019-ST3 and UMPT 2019-ST2 are greater than the higher-rated deals in Upgrade’s original ABS platform in which senior notes have achieved single A ratings from Kroll.

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