Upstart Network returns to the securitization market to sell $320 million in bonds, secured by revenue from its pool of unsecured consumer loans that the company originates through its online marketplace lending program.
The transaction, Upstart Securitization Trust, 2025-1, will sell the notes to investors through three tranches of A. B and C class notes that will all mature on April 20, 2035, says Kroll Bond Rating Agency. The A, B and C classes benefit from initial credit enhancement levels of 42.6%, 33.5% and 20.5%, respectively, the rating agency said.
KBRA assigns A-, BBB- and BB- to the A, B and C classes, respectively.
Known as UPST 2025-1, the deal has several capital structure features that boost credits to the notes. UPST 2025-1 will repay investors through a sequential pay structure that prioritizes repayment of principal to the senior notes. Initial overcollateralization starts at an amount equal to 20% of the note balance, with a target of 25.5% of the outstanding balance.
KBRA notes that the capital structure includes several other enhancements, including amortization triggers based on cumulative net loss levels and material modified loan ratios. If the deal breaches these triggers, all available funds will be applied to repaying the principal on the notes, but if the transaction resolves the situation, payments will resume their regular priority.
There is also a non-declining reserve account that, at closing, will equal 0.50% of the initial pool balance, KBRA said.
Upstart's collateral pool includes 47,463 loans, with an average balance of $8,428, a weighted average (WA) coupon of 23.3% and a WA FICO score of 680. The pool also has a WA seasoning of four months, the rating agency said.
Geographically, the pool seems to be moderately diversified with Texas, California and Florida accounting for 10.7%, 10.5% and 7.9%, respectively, of the pool.
