Upstart Holdings is sponsoring its latest securitization, a $192.7 million transaction, to purchase loans from the Goldman Sachs Asset Securities Corp., which launched just a few days earlier.
The unsecured consumer loan securitization deal, the Upstart Securitization Trust 2023-1, is slated to close at the end of the month, even as the sponsor company implements major changes at the company, according to the Asset Securitization Report's deal database.
In one change, Upstart Holdings finished off a rough business operating year by laying off 20% of its workforce, and suspend building out a small business lending product until business conditions improve, the company announced in a regulatory filing.
Upstart also recently integrated Customers Bank into its network of unsecured consumer loan providers, an agreement that was finalized in November. Customers sat out this securitization, however, so none of its loans were incorporated into the deal, according to a pre-sale report from Kroll Bond Rating Agency.
For now Upstart's securitization business goes on, and the 2023-1 deal will be secured by revenue from some 36,509 loans that have an average balance of $6,945. Goldman Sachs is the likely manager, as it has been on virtually every other Upstart Securitization Trust transaction.
The current transaction will issue notes through three classes, according to KBRA, which receive credit enhancement from subordination of the junior note classes, overcollateralization (OC), a non-declining cash reserve account and excess spread.
KBRA says it believes that the current modes of credit enhancement are enough to withstand its rating stresses, but that a number of issues could still present lingering issues. Recent Upstart transactions, especially those that have closed since Q1 2021, have recorded higher delinquency and cumulative net loss rates. While Upstart tightened underwriting and pricing changes to address this, KBRA believes it is still too early to determine how the adjustment might have impacted the company's static pool performance on more recent originations.
KBRA expects to assign ratings of 'A-' to the $138.5 million, class A notes; 'BBB-' to the $22.8 million, class B notes and 'BB' to the $31.1 million, class C notes. All notes have a final scheduled payment date of Feb. 20, 2033.
