Bloomberg First Word by Adam Tempkin (June 6, 2016)
Existing marketplace lending (MPL) ABS investors are eager for more deals in the secondary mkt, according to PeerIQ monthly update published June 5.
- MPL ABS credit spreads continued to tighten in the secondary
following the LendingClub (LC) headline-news disclosure
event and earnings announcement
- Behavior of MPL ABS credit spreads was in sharp contrast to
volatility observed in the LC stock price
- NOTE: PeerIQ is a credit risk analytics firm serving the
peer-to-peer lending sector
- In order to gauge credit investors’ response to May 9 LC
event, PeerIQ looked at quoted secondary spreads on several
CHAI and SOFI deals: CHAI 2015-PM2, CHAI 2015-PM3, CHAI
2016-MF1, and CHAI 2016-PM1; SOFI 2013-A, SOFI 2014-B, SOFI
2015-B, SOFI 2015-C, SOFI 2016-A
- NOTE: CHAI shelf has historically consisted principally
of unsecured consumer installment loans issued by
Prosper. SoFi shelf consists of student loans; student
loans are non-dischargeable and have substantially
different default, prepayment characteristics and loan
terms as compared to consumer loans, “so we should
limit our conclusions accordingly,” PeerIQ says
- Most actively quoted parts of CHAI capital structure are
the Class B and C sub tranches; fewer quoted
observations on senior tranches owing to short duration
of these bonds
- In contrast, SoFi senior pieces, A, A1, and A2’s
frequently appear on dealers’ inventory and quote sheets
and the B’s exhibit limited trading
- Credit spreads in the secondary continued to tighten post-
May 9
- When looking at spreads by tranche, tightening is most
prevalent for the riskiest CHAI C bonds, indicating
reduction in mat’s expectations of cumulative losses
- SoFi senior tranche has tightened substantially and its
current levels are the tightest seen
- Tightening is “welcome news -- it affords SoFi the
ability to extend even lower rates to consumers and
increase their effective net interest margin”
- The base of participating ABS investors in SoFi’s last
deal, SOFI 2016-B, has expanded considerably and
includes 38 investors across Europe and Asia; “Broader
mkt acceptance and interest is lowering the yield”
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