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Upgrade reduces prime-loan collateral in new master-trust issuance

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For the second time in a month, Upgrade Inc., the startup online lender launched by ex-LendingClub CEO Renaud Laplanche, is marketing a securitization of unsecured consumer loans from its newly formed master trust.

This pool in the $45.68 million Upgrade Master Pass-Thru Trust Series (UMPT) 2019-ST2 consists of a larger share of “near-prime” borrowers than in June 2019 issuance – a continuing shift toward lower credit tier borrower through its master trust platform.

The lower-quality “near-prime” loans make up 29.99% of the pool, compared to 20.57% for the $30.6 million UMPT 2019-ST1.

While not impact ratings or credit enhancement levels, but is prompting Kroll Bond Rating Agency to slightly increase loss expectations. Expected losses on the loans (which have a collateral interest rate of 18.77% and gross excess spread of 13.74%) are 14.8%, an increase from the assumed 13.95% loss on the earlier UMPT deal.

The capital stack involves a single Class A tranche, backed by a pool of prime, near-prime and “Prime Plus” loans of three-year and five-year terms.

The proceeds from the bonds sale will be used to purchase loans from a Jefferies LLC unit that aggregates the loans.

The notes have an expected coupon pricing of 4%, and are supported by 30% credit enhancement and a BBB- rating – similar to the UMPT 20-19-ST1.

While the second issue through its master trust, the deal is Upgrade’s third of 2019. In February the company priced $226.9 million in a static offering of loans.

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