Getting a Leg Up: P2P Global Investments & Zopa Work on Europe’s First Securitization of Unsecured Consumer Loans Originated Online

Europe at Night MapP2P Global Investments and Zopa have teamed up to work on Europe’s first securitization of unsecured consumer loans originated online, reported Bloomberg. The £138M ($179 million) transaction is backed by 27,137 loans to individuals, according to Moody’s Investors Service, with a weighted average seasoning of 10 months and a maximum loan term of five years. Deutsche Bank AG is arranging the deal, branding it “Marketplace Originated Consumer Assets 2016-1.”

The loans in the new transaction were made by P2P Global via Zopa, the U.K.’s largest P2P lending platform. P2P Global invests directly and indirectly into consumer and SME loans, as well as receivables, which are originated on peer to peer platforms in the US, UK and Europe. During July 2015 P2P Global Investments successfully raised £400M

Jaidev-JanardanaFounded by Giles Andrew in 2005 and helmed by Jaidev Janardana Zopa has facilitated more than £1.7 billion P2P loans. Some of the lender’s accomplishments including it topping £800 in loans (over $1.16 billion for the Yanks) and returning £50M in interest to investors and becoming the first UK P2P platform to surpass £1 billion (about $1.564 billion) in lending. The company also received the Most Trusted Personal Loan Provider at the 2015 Moneywise Customer Service Awards. Janardana and his team expect 2016’s fourth quarter to be EBITDA positive and on track to be profitable in 2017.

According to Altfi:

Zopa Money Trees“Moody’s has assigned a rating of (P)Aa3 to the £114M senior tranche of Class A Notes. The Class B Notes, of which there are £7.5M, were rated (P)A2. The £7.5m of Class C Notes were assigned a rating of (P)Baa2. The £9M of Class D notes were rated (P)Ba3. There are also £12M of Class Z Notes which will not be rated. All Notes are due October 2024. Target Servicing Limited has been appointed as the back-up servicer of the portfolio. The portfolio lifetime expected defaults for Moca 2016-1, according to Moody’s, is 7.0 per cent, with expected recoveries of 5.0 per cent. Aloysius Fekete, chief product officer at AltFi Data, offered his take: “AltFi Data has loss data on the Zopa loan cash flows from 2006 going through the financial crisis in 2008. The worst loss rate Zopa experienced on any yearly cohort was 4.8% for the 2008 vintage loans. Moody’s expections are conservative, but in our opinion reasonable given the recent addition of lower risk bands in Zopa’s portfolio.”

In addition, Altfi reported that Fitch has conferred a landmark rating on the Zopa deal:

“Fitch rated the Class A Notes “AA-(EXP)”…the highest rating to have ever been assigned to a marketplace lending transaction by Fitch. There has been over $10B in global securitisation issuance by the marketplace lending sector to date. Fitch declined to rate Funding Circle’s SBOLT 2016-1 earlier this year.”

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