Lending Club diversifies with pass through deal

Lending Club closed a debut pass through security last Friday, a Consumer Loan Underlying Bond (CLUB) certificate, as the company looks to diversify funding and grow the investor base beyond its securitization program.

  • By Sasha Padbidri
  • 01 Dec 2017
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The $25m transaction was bought by an institutional investor seeking “a liquid vehicle with which to access the consumer credit asset class”, chief capital officer Patrick Dunne told GlobalCapital, though he declined to reveal pricing information or the buyer’s identity.

“We have a broad range of investors on our platform that buy a whole range of our products, like our fractional notes, and then we have banks and asset managers which predominately buy our whole loans and we wanted to diversify the investor base further,” Dunne said.

The inaugural CLUB certificate consists of whole loans structured as a pass through security, and trades in the over-the-counter market with a CUSIP number, cleared through the Depository Trust and Clearing Corporation (DTCC).

Unlike a securitization, the certificate only pools three year and five year loans of a particular grade that the investor is looking for. Lending Club has a loan grading system where each consumer loan is assigned a grade ranging from ‘A’ to ‘G’, reflecting the borrower’s credit report. Last month, the company announced that it had stopped selling ‘F’ and ‘G’ grade loans to investors due to a push to tighten underwriting standards.

“We are still originating ‘F’ and ‘G’ loans but they come to our balance sheet. There could be times where institutional investors might want to buy from our balance sheet, but we’re not listing them on our prime platform at the moment until we feel confident that we can generate the returns that investors want on those loans,” Dunne said.

Evolving model

The launch of the pass through certificates highlights the effort undertaken by Lending Club to expand its sources of funding. Earlier this year, the company announced it would be a frequent issuer in the securitization market with the launch of its multi-seller CLUB securitization shelf. It also stated in its recent earnings call that it was shrinking its proportion of bank funding in the year ahead.

“One of the reasons for the securitizations was to access a broader group of investors that wanted a rated fixed income security that buckets risk and return in different ways,” he said, and noted that the two securitizations helped to attract 30 brand new investors to the platform.

Dunne added that the company also leveraged the capabilities developed from its securitization programme to create the CLUB certificate, and that some buyers of their securitizations could see the pass through certificates as an attractive alternative.

He confirmed that though the certificates and the securitization shelf share the same CLUB name, the whole loans in the certificates will not be packaged into ABS.

“They may have similar grades and terms, but they’re not the same loans,” he said. 

One in the pipeline

Meanwhile in securitization, Lending Club filed an ABS-15G with the US Securities and Exchange Commission on Wednesday evening for an upcoming transaction, Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-NP2. Citi is leading the deal, according to the documents.

This is Lending Club’s fourth and final offering for 2017, following a November announcement by company executives to bring a pair of deals this quarter to deliver an additional $50m in securitization-related revenue.


  • By Sasha Padbidri
  • 01 Dec 2017

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 120,126.76 346 12.85%
2 Bank of America Merrill Lynch 99,988.41 288 10.70%
3 Wells Fargo Securities 88,516.28 265 9.47%
4 JPMorgan 69,113.88 208 7.39%
5 Credit Suisse 51,313.00 155 5.49%