ZOPA’S debut securitisation has received the highest rating cap of any peer-to-peer lending transaction in the world by Fitch Ratings, despite forecasts of rising default rates.
The ratings agency gave the most senior tranche of loans an expected rating of AA-, arguing that the platform’s unparalleled data and longevity superceded the risks.
“Fitch believes the high transparency of Zopa’s data, the longer history than peers globally and the robust origination and underwriting standards support the high rating,” said the report.
News emerged earlier this week of the first ever securitisation of unsecured consumer loans in Europe. The loans, that are made through Zopa’s platform, are being sold by P2P Global Investments, the London-listed investment trust.
Fitch Ratings noted that Zopa’s appetite for risk has increased in recent years and that it now takes on lower-quality loans to drive growth. However, this has been factored in to the ratings.
“Our ratings take our expectation of rising default rates into account,” Markus Papenroth, head of European ABS at Fitch Ratings, told Peer-to-Peer Finance News.
“Our multiples came out at the higher end, due to the novelty of the sector and we fed that into the model.”
The ratings agency noted that 80 per cent of the platform’s £1.6bn loan book was originated after January 2013, around the same time it started taking on riskier loans, so they “cannot accurately predict how these loans will perform in a stressed environment”.
Zopa follows Funding Circle and LendInvest in securitising the loans that are made through its platform. Securitisation is already popular in the US P2P space and it appears likely that it will grow here in the UK.
“Securitisation is something that comes up repeatedly when we speak to P2P platforms as it is perceived to be a good source of funding,” said Papenroth. “However, it depends if the platform has the scale to do it.”
The 27,127 loans that are being packaged up and sold to institutional investors are mainly being used to finance cars, home improvements and service existing debts.
It is understood that the issue will be priced later in September.