Jefferies and CircleBack announce $500m P2P securitization agreement
US peer-to-peer lender CircleBack Lending has announced a $500m securitization facility with Jefferies. The agreement, believed to be the largest deal in the peer-to-peer market to date, could help foster broader capital markets interest in the nascent asset class.
Starting from October 1 this year, Jefferies will acquire loans originated by CircleBack. The first securitization could be around $150m in size and should come in the first quarter of 2015, CircleBack CEO Michael Solomon told GlobalCapital at the ABS East conference on Tuesday.
“This deal puts us on the map,” said Solomon. “It’s the start of our expansion.” He added that it could pave the way for other investors in the space to acquire loans and potentially partner with Jefferies in new securitizations.
Peter Renton, author of the Lending Academy blog, the most widely-read educational resource on the peer-to-peer lending market, said he believed the agreement was the largest single deal in the space to date.
Since its launch in 2013, CircleBack — based in Boca Raton, Florida — has originated over $4m in loans for purposes including debt consolidation, home improvement and small business.
The fixed rate instalment loans range in size from $3,000 to $35,000. Borrowers need a FICO score of at least 660 to qualify, and they must also pass an interview and verification process conduced by CircleBack.
Peer-to-peer lending has been dominated by larger firms like Lending Club — which is preparing for an IPO — and Prosper, but the Jefferies agreement could make CircleBack a “third contender”, said Renton.
“The marketplace lending space is heating up now and this latest deal demonstrates the tremendous interest this asset class is garnering from Wall Street,” he wrote.
SoFi, a peer-to-peer lender that allows university alumni to fund new students’ college education — although it is now moving into consumer loans and mortgages as well — did its second securitization this year and is planning a third in November. It issued directly, as opposed to having a third party acquire its loans and securitize them.
Earlier this year, Eaglewood Capital Management boosted the size of a securitization of Lending Club loans. Other investors in the space that could do similar deals include Victory Park Capital.