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Peer2Peer Finance News | August 19, 2019

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P2P securitisation trend continues as Funding Circle mulls new deals

P2P securitisation trend continues as Funding Circle mulls new deals
  • On October 24, 2016

FUNDING CIRCLE is now considering new securitisation deals, as the debt-packaging trend gathers pace in the UK.

The peer-to-peer lender’s chief executive and co-founder Samir Desai told Peer-to-Peer Finance News that Funding Circle “has plans to do more” securitisations in the near future.

“There are four key segments,” said Desai. “You want to have as diversified funding as possible, so that includes retail investors, institutional investors, government and managed funds.

“You don’t want to be reliant on any one source but it’s a very important part of the mix and brings a lot of credibility that a lot of people who have looked at a lot of different asset classes have looked at this in detail and got comfortable with it.”

Funding Circle is not the only platform looking to package up more of its loans and sell them off to institutional investors in tranches. After its recent £138m deal was oversubscribed, Zopa’s head of capital markets Jonathan Kramer said that the firm will “definitely” be looking to do more securitisations as early as 2017.

“Our ambition is that the Zopa asset is well known in the asset-backed securities community and that means repeat issuance of loans backed by Zopa,” he said.

Securitisation has emerged as one of the biggest trends in the P2P sector, with Moody’s even predicting a boom over the next two years, as more and more platforms leverage their debt to grow their businesses.

Earlier this year, Funding Circle became the first P2P platform to have its loans securitised, in collaboration with Deutsche Bank and KLS Diversified Asset Management. Sachin Patel, global co-head of capital markets at Funding Circle said that the deal was a response to a clear market demand – asset-backed loans were underperforming, so investors were looking for new opportunities to buy debt; while at the same time, small businesses were finding it difficult to access fixed term loans.

“Securitisation is a conduit for investors which would not otherwise be available,” he said. “It opens up the loan product to a whole new range of investors on the debt markets.”

In the US, the P2P securitisation sector is now valued at $12.6bn, with $5.4bn of that coming from 2016 alone. Moody’s has predicted a rapid rise in UK P2P securitisations, with Greg O’Reilly, assistant vice president and analyst at Moody’s saying that “securitisation will provide access to new investor bases, widening their access to institutional capital.”