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First European P2P securitisation sees Moody’s upgrade

By Daniel Lanyon on 17th March 2017

Good news for Funding Circle as it sees an upgrade to a pool of  its securitised loans from the ratings agency.


Ratings agency Moody’s has upgraded its outlook for the first ever in the European marketplace lending securitisation, the £130m Funding Circle ‘SBOLT’ due to lower than expected losses.


Securitisations have been an interesting but thorny trend for p2p/marketplace lending investors, particularly institutions, as while they are widely seen as an important feature of the maturity of the asset class they have not always gone to plan. Notably, VPC speciality Lending’s holding of US consumer loans from Avant – another securitised pool – led to its own difficulties last year.


Moody’s has upgraded the rating on the four senior tranches of the SBOLT securitisations primarily due to the deleveraging of the transaction following a high level of prepayments from the underlying portfolio.


SBOLT - 2016 -1, to give the securitisation’s full name, launched in May 2016. It represents approximately £130m of loans originated via Funding Circle’s UK platform.


The rating changes are: A notes (£87.8m, outstanding £43.0m) from Aa3 to Aa2, B notes (£6.1m) from A2 to A1, C notes (£7.8m) from Baa2 to Baa1, D notes (£6.3m) from Ba1 to Baa3. The securitisation is based on a fixed pool of loans, with no reinvestment of proceeds from repayments. The weighted average cost of debt at issue was c.3.3 per cent.


The A notes were issued with an original balance of £87.8m, but have been paid down to £43.0m. Cumulative defaults, Moody’s says, have turned out be slightly below initial expectations. Delinquent loans also have remained at low levels, averaging nearly 0.8 per cent of the current.


As a result, Moody’s has ramped up its prepayment assumption from 8 per cent to 12 per cent per year. It has left its default assumption unchanged at 10 per cent of original balance.


Andy Stone

21 Mar 2017 05:55pm

Cheers Dan - appreciate your job's not an easy one. This sort of stuff just doesn't leave much room for error as I'm sure you're aware!

Daniel Lanyon

21 Mar 2017 01:40pm

Thanks for your comment Andy, we've adjusted the standfirst a little. Hope that makes it more clear. Daniel Lanyon, Editor, Altfi

Andy Stone

21 Mar 2017 01:23am

Few issues. One - why have a picture of the Wall Street bull when the deal upgraded is a European one? Two, the ratings upgraded are on the securitization, not "the loan originations" as you've written. Not sure what that means. Three, you've written in the first line that the transaction has been upgraded due to lower than expected losses. While this may be true to an extent, the main reason given by Moody's for the upgrades is the high level of prepayments, which you correctly note, further down. Four, you describe "securitisations as an interesting but thorny trend." I mean what does that even mean? What's a thorny trend? A growing number of rose bushes in the B notes? Five, the first paragraph (starts "Ratings agency, Moody's") doesn't actually make sense.

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