UK’s Funding Circle Facilitates £240M Securitization of Investor’s SME Loan Portfolio

Funding Circle (LSE: FCH),which claims to be the UK’s largest small business lending platform, and Waterfall Asset Management (WAM), a multi-national institutional asset manager, announce “the closing of a £240m securitization backed by SME loans.”

The loans, “financed by funds managed by WAM, and originated through the Funding Circle platform, were priced on 8th June and rated by both S&P and Fitch as AA+/ AA, respectively.”

The senior most bond “was priced at SONIA + 1.35%, demonstrating strong execution and investor appetite, despite recent volatility in the UK markets.”

The transaction is intended “to qualify as a UK Simple, Transparent and Standardised (STS) securitization; meeting the high regulatory standards expected by investors.”

This securitization has allowed “a range of institutional investors to purchase these loans through the asset-backed securities (ABS) market, broadening access to the SME loan asset class.”

This demonstrates Funding Circle’s ability “to leverage the UK’s deep capital markets to provide funding for SMEs; a largely untapped source of growth for these businesses.”

Funding Circle has now “supported institutional investors with securitising a total of £1.4bn of UK SME credit through the ABS markets, helping them to efficiently redeploy their capital.”

WAM will use the proceeds of this latest securitization “to continue deploying funds to small businesses through the Funding Circle platform, as part of a £1bn funding partnership agreed last year.”

This funding will seek “to help tens of thousands more SMEs to invest, grow and create jobs in communities across every corner of the UK.”

WAM is just one of “a wide range of institutional investors—including banks, asset managers, pension funds and insurance companies—to leverage Funding Circle’s technology and distribution platform to deploy funding to SMEs.”

Funding Circle’s value proposition to these investors is “built on a strong track record of robust and attractive returns, driven by powerful credit models and more than a decade of technology and data investment.”

Lisa Jacobs, Chief Executive Officer, Funding Circle, said:

“We’re proud to continue our long-standing partnership with Waterfall Asset Management; together increasing Capital Markets’ investment into small businesses through this securitisation. Continued investor demand in the loans we originate is reflected in its pricing, and demonstrates the value our technology and distribution platform provides, even in challenging economic environments.”

As noted in the update:

“Today’s announcement is a great example of how we’re helping institutional investors to leverage the ABS markets and deploy their capital with optimal efficiency. We’re proud of the relationship we have built with Waterfall Asset Management over many years; helping them lend more than £1.7bn to SME borrowers through our platform to date. This latest securitisation validates the attractive risk-adjusted returns we have been able to deliver to investors in the process.”

Dipesh Mehta, Co-Head of Global Capital Markets, Funding Circle, said:

“We’re pleased to have supported thousands of small businesses through the Funding Circle platform over the past five years. We appreciate Funding Circle’s flexible approach as a counterparty, and are delighted this latest securitisation allows a broader range of market participants to access this asset class.”

As covered, Funding Circle is “a lending platform for SME borrowers. Established in the UK in 2010, and now the leading lending platform to SMEs, the Group also has a material and growing presence in the US. Globally, Funding Circle has extended more than £15bn in credit to c.135,000 businesses.”

For SME borrowers, Funding Circle provides what it claims to be “an unrivalled customer experience, delivered through its technology and data, coupled with a human touch.”

Its solutions continue “to help customers access the funding they need to succeed.”

For institutional investors, Funding Circle provides access “to an alternative asset class in an underserved market, and delivers robust and attractive returns.”

For lending investors, Funding Circle provides access “to an alternative asset class in an underserved market, and delivers robust and attractive returns.”

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