Author Topic: LC is going to do their own securitizations  (Read 10906 times)

Fred93

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LC is going to do their own securitizations
« on: April 28, 2016, 05:04:42 AM »
LC is going to issue some bonds which are securitizations of loans.

Relatively poor article in Wall St Journal.  Copy & paste journalism takes sentences and bits if issues from prior article and pastes em in.  Nothing official.  This is a rumor piece.  Probably informed rumor, but no official info available yet.

http://www.wsj.com/articles/lendingclub-looks-at-new-deal-to-crack-tough-market-1461663002

Article says nonsensical stuff such as
Quote
Recent securitization transactions that have been sold to investors were largely done at much higher yields, reflecting concerns about the creditworthiness of borrowers and the economy. Buyers of a March bond offering based on Prosper Marketplace Inc. loans demanded yields as much as five percentage points higher than a similar deal late in 2015.

No.  And by the way "much higher" is not meaningful English unless you say much higher than what.  LC hasn't said what the interest rates on these new bonds are going to be, so you can't say something else was higher than these bonds that the article is supposedly talking about.  You can't just sell a securitization at a much higher interest rate than the stuff inside it, 'cause where would the money come from to pay that interest?  They are referencing the recent articles about the securitizations of Prosper loans without being specific, who had their risky tranches sell at a higher rate than they sold the previous time.  That has little meaning to you or me or LC, so is particularly misleading in this article.  We don't even know whether LC is going to divide this up into tranches based on performance as so many of the securitizations do.

It makes sense for LC to take this step.  Its just a repackaging.  They package their product several different ways now, to appeal to different kinds of investors.  This is just another packaging.  They create bonds packaged up in little bitty pieces (notes) that they sell to retail investors.  They already have passed the regulatory scrutiny necessary to issue bonds.  Why not package up some big bonds (securitizations) to sell to some big guys who are used to buying a product in that shape?  If LC doesn't take the lead, then other folks are going to do securitizations, and LC loses control.  (Has already started.)  If those 3rd parties do stupid stuff, then you'll end up with bad PR, as you'll be mentioned in every article about the train wreck.

Will be interesting to learn the details of how these things are going to be packaged, but none of that info is available at this time.  How the things will be split into tranches.  To whom they will be available.   What data will be available, and to whom.  At this point there is no SEC filing.  No press release.  Just rumor that LC will be "discussing" this with some big investors this week.


Shylock

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Re: LC is going to do their own securitizations
« Reply #1 on: April 28, 2016, 12:06:53 PM »
Just to confirm - this means investors will be able to buy say, a $1000 bond that has tiny pieces of a bunch of notes? Instead of the same investor say, buying 40 $25 notes?

Seems like this should reduce volatility - at the expense of being able to choose your loans.

I think I'd rather stick with using an external credit model to pick hundreds of loans among thousands, with small, $25-50 notes.

dompazz

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Re: LC is going to do their own securitizations
« Reply #2 on: April 28, 2016, 04:35:00 PM »
Just to confirm - this means investors will be able to buy say, a $1000 bond that has tiny pieces of a bunch of notes? Instead of the same investor say, buying 40 $25 notes?


Yes, though you are going to have to be an institutional investor looking to invest 7 figures in these bonds.  You might be able to find some of them on the secondary market.  Most will be held by large allocators through to maturity.

rawraw

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Re: LC is going to do their own securitizations
« Reply #3 on: April 28, 2016, 05:39:33 PM »
LC has always been opposed to this.  If it occurs, I'm curious what changed.  Wonder if the economics are better

Fred93

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Re: LC is going to do their own securitizations
« Reply #4 on: April 29, 2016, 02:19:01 AM »
There was a session at Lendit on securitization.  Its not intended for this audience, so the discussion may seem obscure to some, but you can get a feel for the sort of issues that people doing securitizations are thinking about.

http://www.lendit.com/usa/2016/videos/state-securitization-market
Current State of the Securitization Market

Current State of the Securitization Market with Chris Phillips, SoFi, Steven Lee, Eaglewood Americas LLC, Stephanie Yeh, Credit Suisse and Ege Tanor, Insikt. Moderated by Robert Villani, Clifford Chance.

I found Stephanie Yeh's comments most helpful.

Fred

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Re: LC is going to do their own securitizations
« Reply #5 on: April 29, 2016, 02:28:12 AM »
Realistically, this means LC will carve a smaller piece of the pie to retail investors.

hzhou9

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Re: LC is going to do their own securitizations
« Reply #6 on: April 29, 2016, 02:34:29 AM »
I noticed that loan supplies are huge since Monday. Maybe this is related to the securitization thing?

Fred

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Re: LC is going to do their own securitizations
« Reply #7 on: April 29, 2016, 03:10:14 AM »
Perhaps this the "new product" that we have been discussing here  http://www.lendacademy.com/forum/index.php?topic=3762.0 ?

nonattender

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Re: LC is going to do their own securitizations
« Reply #8 on: April 30, 2016, 03:30:12 AM »
Perhaps this the "new product" that we have been discussing here  http://www.lendacademy.com/forum/index.php?topic=3762.0 ?

An ETF?  I'd like to see an LC ETF - and, judging by the way Prosper kept talking at LendIt, they'd like to see one, too, so, that tells me
that LC is probably close to finishing one and Prosper found out and is close to starting to copy it - but I think the product is a "loan"...
A little nonsense now and then is relished by the wisest men.

rawraw

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Re: LC is going to do their own securitizations
« Reply #9 on: April 30, 2016, 06:43:00 AM »
Perhaps this the "new product" that we have been discussing here  http://www.lendacademy.com/forum/index.php?topic=3762.0 ?
I think you may be onto something here.

Fred

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Re: LC is going to do their own securitizations
« Reply #10 on: April 30, 2016, 12:43:56 PM »
Coming this May.

http://www.bloomberg.com/news/articles/2016-04-29/goldman-jefferies-said-to-start-marketing-lendingclub-abs-deals

Quote
Jefferies Group is planning to bundle at least $150 million of consumer loans from LendingClub Corp. into bonds and sell them to investors in May, in the first of a series of such deals, people with knowledge of the matter said.

Goldman Sachs Group Inc. is planning to also buy loans from LendingClub and package them into bonds, one of the people said. LendingClub, which makes loans to consumers over the Internet, aims for deals like these to help cut funding costs.

The Jefferies transaction in May will be backed by riskier consumer loans with an average interest rate of 28.5 percent, one of the people said, while Goldman Sachs’s will be tied to debt at the lower end of the "prime" scale.

RaymondG

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Re: LC is going to do their own securitizations
« Reply #11 on: April 30, 2016, 01:57:57 PM »
Quote
Jefferies Group is planning to bundle at least $150 million of consumer loans from LendingClub Corp. into bonds and sell them to investors in May,The Jefferies transaction in May will be backed by riskier consumer loans with an average interest rate of 28.5 percent, one of the people said, while Goldman Sachs’s will be tied to debt at the lower end of the "prime" scale.

Hope it will not impact loan availability to us the retail investors. In Q42015,
   Total Issued        Avg interest rate
E   $175,432,875     19.15%   
FG $60,415,775       24.11%   

The targeted 28.5% is way higher than average FG in 4Q2015. Will LC issue subprime loans specifically for that deal?

PhilGD

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Re: LC is going to do their own securitizations
« Reply #12 on: April 30, 2016, 02:20:08 PM »
Quote
Jefferies Group is planning to bundle at least $150 million of consumer loans from LendingClub Corp. into bonds and sell them to investors in May,The Jefferies transaction in May will be backed by riskier consumer loans with an average interest rate of 28.5 percent, one of the people said, while Goldman Sachs’s will be tied to debt at the lower end of the "prime" scale.

Hope it will not impact loan availability to us the retail investors. In Q42015,
   Total Issued        Avg interest rate
E   $175,432,875     19.15%   
FG $60,415,775       24.11%   

The targeted 28.5% is way higher than average FG in 4Q2015. Will LC issue subprime loans specifically for that deal?

That deal specifically is not a securitization of standard program loans.

rawraw

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Re: LC is going to do their own securitizations
« Reply #13 on: May 01, 2016, 10:45:55 AM »
Maybe it's to fill Santandar's former volume

newstreet

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Re: LC is going to do their own securitizations
« Reply #14 on: May 01, 2016, 12:53:05 PM »
Its very simple.  LC does not have enough buyers so they have to securitize.  There original business model is not panning out.

Looks like Prosper is hitting the skids-shutting down healthcare and laying off around 100 people.  Good thing their execs cashed out at last round.