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Upstart Network seeks third ABS offering in less than a year

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Upstart Network Inc., which recently filed for an initial public offering, separately is seeking to issue $80.7 million in asset-backed securities by early next year.

The ABS pool is composed of fully amortizing, unsecured consumer installment loans originated by banks in New Jersey and Utah.

Upstart, a San Carlos, Calif., company that offers an artificial intelligence-enhanced lending platform and partners with banks to originate credits, declined to comment about the loan offering.

The Upstart Pass-Through Trust Series 2021-ST1 deal is structured as a single tranche rated BBB by DBRS Morningstar and is scheduled to close Jan. 21. The transaction is sponsored by the investment bank Jefferies, whose JUPS affiliate has aggregated loans to be pooled under the master trust that were originated by Cross River Bank (CRB) in Fort Lee, N.J., and FinWise Bank (FinWise) in Murray, Utah.

Those loans have 36-month and 60-month maturities and although the banks also originate 84-month loans, none have been included in the current transaction, according to DBRS Morningstar.

Upstart Securitization Trust deals that closed earlier this year, one on Oct. 30 for $270 million and another Feb. 20 for $375 million, were sponsored by Upstart and Goldman Sachs Asset Backed Securities Corp. Those deals also pooled loans that were originated by CRB and FinWise, and Upstart is the servicer on all three transactions.

Overall credit enhancement on the ST1 deal is a lower than the earlier deals, at 33.25% compared with 39.75% for each of the others. ST1’s initial and target overcollateralization (O/C) of 32.75% is significantly higher than the initial and target O/C of 14.25% for the October deal and 12.30% for the February transaction.

Upstart’s October securitization, according to Finsight, was split into a $191 million Class A portion rated single-A by DBRS Morningstar and A- by Kroll Bond Rating Agency; a $31 million Class B piece respectively rated BBB and BBB- by those agencies; and a Class C, $48 million tranche that was unrated by DBRS Morningstar and rated BB- by Kroll. Pricing was unavailable on this 144A transaction.

Upstart issued its first consumer-installment loan in 2014. DBRS Morningstar cautions in its report that before the pandemic-driven recession, Upstart’s consumer loan lending platform had yet to be tested by a downturn in the credit cycle. “The performance of this particular type of consumer loan in a stressed economic environment has yet to be established,” the credit rating agency said.

Upstart filed a registration statement with the Securities and Exchange Commission for an IPO on Nov. 5. It intends to list its common stock on the Nasdaq.

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