Bloomberg First Word by Adam Tempkin (April 6, 2016)
Citigroup’s marketplace lending (MPL) CHAI shelf tops PeerIQ’s first-ever MPL securitization issuance league table for 1Q, PeerIQ analyst Wilfred Daye writes in the company’s MPL Securitization Tracker for 1Q 2016.
- Morgan Stanley and Credit Suisse round out top 3 slots
- NOTE: PeerIQ is a credit risk analytics firm serving the peer-to-peer lending sector
- Quarter saw a total of 6 deals issued for par amount of $1.5b, with a smaller issuance in line with a widening in spreads and slowdown in broader ABS mkt
- Represents 20.5% growth in total issuance to date and 14.6% growth in number of deals
- “While this remains healthy growth, it reflects a slowdown from previous quarterly volumes”
- 1Q saw issuance of 15 tranches rated by at least 1 ratings
agency – the most out of any quarter to date - Kroll has entered mkt, rating 3 deals in the quarter
- Moody’s hasn’t rated a deal since putting several bonds from CHAI shelf on downgrade review in mid Feb.
- Consumer and student loans fueled MPL growth in the quarter, with consumer P2P loans remaining largest segment at $3.9b vs $3.3b in student loans
- There were no SME deals in 1Q, and the sector remained
at $1.5b - There were 6 new deals in Q1 2016: SOFI 2016-A, CHAI 2016-
MF1, AVNT 2016-A, EARN 2016-A, CHAI 2016-PM1, and MPLT 2016-LD1 - Only Earnest, a student lender, was a first-time issuer
- Avant issued its first rated securitization (AVNT 2016-A); it had previously issued on unrated transactions
- Deal was rated by Kroll
- On Feb. 11, Moody’s put the mezzanine tranches from Citi’s 3 CHAI deals on review for downgrade after observing higher charge-offs and slower prepayment rates than expected
- Strong relative value:
- “We find that investors owning the mezzanine bond can earn a higher unlevered return, access liquidity, bear lower administrative costs, enjoy additional investor protections, and protection from expected credit losses as compared to owning the whole loans”
- Pricing levels observed today are both “remarkable and
temporary” - PeerIQ expects leadership positions on league tables to
change - Morgan Stanley has scaled back size of its fixed income
desk - Size of Citi’s recent securitizations of Prosper has
declined - There has been increased activity from DB, JPM, and
Guggenheim