News

Marketplace deals readied, with innovations

Tuesday 21 February 2017 10:00 London/ 05.00 New York/ 18.00 Tokyo

Kabbage is marketing its first marketplace loan ABS of the year and its second since inception. Meanwhile, SoFi is in the market with its second consumer loan ABS - SoFi Consumer Loan Program 2017-2 - backed by US$343m of consumer loans and comprising several elements that differ from its previous securitisation.

Dubbed Kabbage Asset Securitization Series 2017-1, Kabbage's transaction is backed by US$500m SME loans originated via its online platform. Provisionally rated by KBRA, the deal comprises US$370m single-A rated class A notes, US$79.3m triple-B plus class Bs, US$26.4m double-B class Cs and US$23.8m single-B class D notes.

The advance rate on each note is 70%, 85%, 90% and 94.5% respectively. The initial credit enhancement is 30.50%, 85%, 90% and 94.5%, with a legal final maturity date of March 2022.

KBRA notes that the previous Kabbage securitisation - also rated by the agency - has performed in line with expectations, due to a number of factors, such as an experienced management team and "the operational capabilities to service the portfolio". It adds too that the transaction structure benefits from "sufficient credit enhancement" and a structure that "accelerates principal payments on the note upon a deterioration of asset performance to support the rating on the notes."

In terms of the deal collateral, the pool comprises 97,529 receivables from 29,311 merchants, with the average outstanding receivables balance per receivable at U$4,536 and the average outstanding receivables balance per merchant US$15,094. The weighted average original term is nine months and the weighted average remaining term is 7.7 months.

The average FICO score of the collateral pool is 692 and the largest geographic concentration is in California, accounting for 15.80% of the pool. The second largest state by geographic concentration is Florida, at 10.43%, with Texas third largest at 7.94%.

While Kabbage is seller and servicer of the deal, with the initial back-up servicer role filled by First Associates Loan Servicing, Celtic Bank is originator of the loans. Guggenheim Securities is sole structuring advisor, book running manager and initial purchaser.

SoFi's SCLP 2017-2 has also been provisionally rated by KBRA. The US$307.1m class A notes are provisionally rated single-A and the US$36.56m class Bs triple-B plus.

KBRA notes that the deal is similar to the last in that it is backed by a pool of prime quality unsecured personal loans, but it does contain notable differences. While credit enhancement for SCLP 2017-1 and 2017-2 are "identical", SCLP 2017-2 has 0.10bp more excess spread per annum and a 0.13% lower expected lifetime loss rate on the collateral. The rating agency says that these changes "support break-even cashflow loss coverage multiples that support the same single-A rating for the class A notes and a higher triple-B plus rating for the class Bs."

Furthermore, the collateral comprises loans to borrowers with a higher weighted average free cashflow (US$5,184 versus US$5,166) and lower credit score (730 versus 732). The borrowers have a slightly lower weighted average income of US$141,633 versus US$142,857, the loans have a higher weighted average borrower rate at 9.73% versus 9.6% and the lowest percentage of 84-month loans and the highest percent of 36-month loans.

Notably, SoFi has modified its personal loan credit risk policy to include additional criteria based on an applicant's debt, so that no loan will now be approved if the applicant has a ratio for revolving and instalment debt balance to income above a specified level and if the applicant has two or more unsecured trades opened within the last 12 months. This latter criteria is meant to avoid loan stacking, where borrowers take out multiple loans from different lenders. The combination of these new policies, KBRA adds, should "have a positive impact on future loan performance."

KBRA notes that SoFi has continued to grow successfully in terms of loan origination, with the platform originating US$1.005bn in personal loans in 4Q16. This is an increase of US$348m on the prior quarter and the largest quarter in the company's history, exceeding the previous high of US$895m from 4Q15.

SoFi will act as sponsor, administrator, originator, lender and servicer on the deal, with Systems & Services Technologies acting as back-up servicer and custodian. Wilmington Trust will act as indenture and underlying trustee.

21/02/2017 10:00:26