Winner: Fortuna Consumer Loan ABS 2022-1
The second social bond offering from German lender auxmoney has won SCI’s ESG Securitisation of the Year Award. Dubbed Fortuna Consumer Loan ABS 2022-1, the €225m true sale securitisation of a static pool of unsecured consumer loans sold by auxmoney was arranged by Citi, which also served as joint lead manager alongside BNP Paribas.
Founded in 2007, the German loan originator has grown to establish itself as a leading digital-lending platform for consumer credit in Europe. Through unique risk models and truly digital processes, auxmoney is able to improve access to affordable credit while simultaneously reducing the risk and cost of lending. As of March 2023, auxmoney has originated loans to its customer base in excess of €4bn - of which close to €1bn were originated in 2022 alone.
Dedicated to lessening financing exclusion in the market, auxmoney lends to the self-employed, freelancers, entrepreneurs, employees in probationary periods, non-Germans, both the young (under 25 years) and the elderly (over 65 years), those whose household income is below €1,500 per month, as well as consumers with low credit bureau scores (such as Schufa E or lower).
Of the consumers in Fortuna 2022-1’s highly granular portfolio, 77% meet at least one of these individual criterion, according to third-party opinion from ISS. Of the consumer loans granted to 25,054 entirely private individual borrowers in Germany in the portfolio, more than half (55%) were given to borrowers with a low credit bureau score.
Daniel Drummer, cfo at auxmoney, explains: “To us, the social aspect of this deal is not just a label, but at the heart of our business model. auxmoney strives to use best-in-class technology - not only to provide a superior user experience to all of our customers, but also to deliberately serve consumers who are underserved by traditional lenders. As a result, we are able to have a considerable social impact by giving people access to financial means - improving the lives of many.”
Fortuna 2022-1’s triple-A rated class A notes follow the standards defined in the International Capital Market Association’s (ICMA) Social Bond Principles. Proceeds from the issuance are used to enable the financial inclusion of the relevant population groups, in line with auxmoney’s own dedicated Social Bond Framework - which fosters the United Nations Sustainable Development Goal targets.
With a majority socially-linked portfolio, the second Fortuna transaction is also STS compliant, with the class A notes now eligible as collateral for ECB repo operations and LCR purposes.
SVI served as third-party verification agent for Fortuna, with the deal also benefitting from reporting made available through the European DataWarehouse and Bloomberg – with cashflow modelling received via Bloomberg (FORTA 2022-1 Mtge) and Intex (FRTNA221).
Boudewijn Dierick, md and country executive at auxmoney Investments, adds: “We keep the structure for investors consistent and transparent, using the same name and same programme for each transaction. This allows us to come in as a repeat issuer and build long-term relations with various investors.”
In fact, at the time of writing, the second Fortuna transaction had already been succeeded by the firm’s third and largest social bond offering so far - Fortuna Consumer Loan ABS 2023-1 - further cementing auxmoney’s position as a reliable issuer in the ABS market.
Dierick comments: “Our latest deal was several times oversubscribed. We have been delighted by the positive reception which we continue to receive from the capital markets and the direct impact this allows us to have on improving the lives of many borrowers.”
Beyond its dedication to offering responsible lending and fostering financial inclusion in Germany, auxmoney also strives to reduce its carbon footprint and conduct business according to the highest ethical standards, with prudent risk management and corporate governance.
Despite broader macroeconomic pressures, ESG considerations continue to be at the core of auxmoney’s business. On the impact of the macroeconomic environment on auxmoney, Dierick shared: “So far, we’ve seen the portfolio perform very resiliently. At the same time, we are thrilled by the impressive demand for our bond issuances, particularly when considering that the ABS market was basically shut for a few months before our transaction.”
In reopening the European consumer ABS market with its latest issuance, auxmoney may not just be proving the value of its own social bond offerings, but also setting the precedent for socially sustainable European ABS issuance going forward.
With the success of this deal, auxmoney carries great optimism into not only its own social offering going forward, but also the growth of the social portion of the ESG securitisation market. “I do expect the social bond markets to grow further from here,” considers Drummer. “We’ve noticed that more investors are focusing on ESG than ever before, with some of our investors telling us that they are deliberately investing in our deals because of this social element.”
He concludes: “Irrespective of investor reception, ESG is a very important subject for us, and we are proactively furthering the ESG agenda - both internally and externally.”
For full coverage of SCI’s ESG Securitisation Awards, click here.