THE ALTERNATIVE lending sector is seeing a new wave of securitisations, as platforms look to tap the debt capital markets for cash.
Online property finance marketplace LendInvest completed its debut securitisation last month, packaging up £259m of UK buy-to-let mortgage loans.
The securitisation was oversubscribed, indicating a strong appetite among institutional investors.
Citi acted as sole arranger, while BNP Paribas, Citi and HSBC acted as joint lead managers on the deal.
Meanwhile, Funding Circle is no stranger to the securitisation space. It emerged last month that the peer-to-peer business lender was embarking on its fourth transaction, with Deutsche Bank mandated as arranger and lead manager.
It comes after a £187m portfolio of business loans originated by the peer-to-peer lender was securitised in April, sponsored by Pollen Street Capital.
Zopa has embarked on two securitisations of its consumer loans, and the P2P platform’s head of capital markets Jonathan Kramer said last year that the firm is anticipating further issuances.
A report released by credit agency DBRS earlier this year predicted that securitisation will play a key role in the growth of P2P lending in the UK and Europe.
“We’re seeing new marketplace lenders increasingly look towards the securitisation market for funding,” Christian Aufsatz, managing director, head of European structured finance at DBRS, told Peer2Peer Finance News.
“They see it as a profitable and efficient way of funding P2P lending.”
However, Aufsatz noted that there is some caution among institutional investors due to the uncertain economic climate.
“They will look at the type of loans that have been securitized and assess whether they have previously been tested in a recession,” he added. “A lot of these platforms are quite new so they have only operated in a benign market.”
Neil Faulkner of P2P research firm 4th Way said that securitisations enable platforms to free up more of their own capital, potentially to underwrite more loans. However, he warned that investors may be complacent about the risks.
“The growing size of platforms, and tightening competition, will impact quality in places,” he said. “On top of that, there is always the latent risk contained in extremely high domestic and global debts, as well as ongoing systemic risks that I don’t believe have been properly addressed by regulators and central banks.”
This story first appeared in the print edition of Peer2Peer Finance News, which can be read online here.