CreditFlux by Jon Close (July 7, 2016)
Online retailer Amazon has been quietly building a business lending to its customers and now looks set to open this asset book up to investors by securitising some of these loans.
Nick Clemente, a former director with BNP Paribas’ structured credit team responsible for origination and execution of structured credit and credit derivatives, has joined the tech giant to run capital markets for its Amazon Lending business.
A recent investor newsletter from the firm referred to the group as having provided financing of over $1.5 billion to small and medium-sized businesses across the US, UK and Japan. Amazon Lending specialises in short-term lending and is said to be sitting on $400 million of loans.
The newsletter adds that Amazon Lending is looking to partner with a bank so that these dealers can manage the “bulk of the credit risk”.
There are three main ways companies can share the risk of these types of loans, says Ram Ahluwalia, chief executive officer at PeerIQ, a credit risk analysis company focusing on marketplace lending. “They can sell the loans to banks, the banks could fund these loans, which will almost certainly make up part of the solution, or they can securitise,” he says
New York-based Ahluwalia adds that securitisations of similar sized loans typically comprise three or four tranches with a very simple waterfall. PeerIQ’s marketplace lending securitisation tracker shows $1.5 billion of these deals were done in the first quarter of 2016, across six deals.
Amazon did not respond to questions on whether it was planning on securitising its loan book. However, Clemente’s hire would suggest it is looking at this as an option. Clemente started his career as an analyst in 1991 with Kidder Peabody where he worked on ABS pricing and modelling. Since then he has worked with some of the biggest names in structured products.
[Original article available here.]