Upstart, fresh off IPO, returns to ABS market in $207M deal

Upstart is proposing its second securitization of unsecured, nonprime consumer loans of the year, in a $207.86 million transaction backed by loan originations on the platform acquired by deal co-sponsor Goldman Sachs.

Upstart Securitization Trust 2021-1 includes three tranches of notes, including $142.83 million in senior Class A notes with preliminary single-A ratings from DBRS Morningstar and Kroll Bond Rating Agency.

According to presale reports issued Monday by both agencies, the deal is the 15th asset-backed transaction packed by the trust for Upstart, which in December had an initial public offering that raised $240 million for the San Francisco-based company led by chief executive Dave Girouard.

As in prior deals, all of the loans were issued through Upstart’s online platform and underwritten by two partnering banks, New Jersey-chartered Cross River Bank and FinWise, a state-chartered institution in Utah.

The collateral consists of 23,426 loans with three-year, five-year or seven-year terms, with a current balance of $255.9 million, with an average original size of $11,728. The loans are seasoned an average of four months and have an average APR of 22.48%.

The borrower profile of the pool shows a weighted average FICO of 678.

DBRS Morningstar states that Upstart loans have shown better-than-expected performance, given the COVID-19 pandemic conditions that disrupted the national economy with fast-rising unemployment in mid-2020. Along with government stimulus and unemployment assistance programs, Upstart’s temporary relief program allowed 92% of borrowers granted two-month forbearances to resume making at least one payment after the expiration of the deferment period.

Of those offered temporary relief (which ended June 4), 12% remain delinquent and 20% have had loans modified, according to the ratings agency reports.

DBRS Morningstar’s weighted-average default assumption for the 2021-1 pool is 20.16%, and the net loss assumption 19.15%.

On Friday, Upstart priced a $108 million note issuance (rated BBB by DBRS Morningstar) through its pass-through master trust backed by loans aggregated by an affiliate of Jefferies.