Ten marketplace lending securitizations priced this quarter totaled $4.4 billion, a record for quarterly issuance, head of research Ashish Dole said. That is 100 per cent growth in issuance over the same quarter in 2016. Cumulative issuance is now $28.2 billion from 106 deals.
These securitizations were significantly oversubscribed, Mr. Dole added, signs of a maturing industry and one where ratings agencies are more familiar with the collateral. All deals were rated, with DBRS leading the rating agency league table and Kroll pacing the unsecured consumer sub-segment.
“Moody’s is becoming more involved,” Mr. Dole said. “And we would expect that other Big 3 rating agencies would also get more involved as the asset class develops performance history on which models can be based.”
The largest deal occurred when SoFi issued the largest-ever consumer and student marketplace lending deals, Mr. Dole said. SOFI 2017-F was backed by $769 million in student loan collateral. Its senior tranches earned AAA ratings by major agencies.
That record may not last long, Mr. Dole suggested.
“This year we have already seen SoFi’s $960 million securitization and there’s definitely market appetite to see deals larger than $1 billion.”
“The main theme is the sector continues to mature,” Mr. Dole said. “MPL deals are in favor in the capital markets, and we expect the trend to continue.”
Goldman Sachs, Deutsche Bank, and Morgan Stanley continue to top the issuance league tables with more than 49 per cent of MPL ABS transaction volume.
Spreads at issuance are tighter in the consumer space across credit tranches, although senior tranches priced marginally wider. In the student space, As priced 55bps tighter, while Bs and Cs priced 94bps and 240bps tighter respectively. Spreads in warehouse financing remain stable.
Spreads tightened this quarter, and the spread curve flattened as investor demand for B and C pieces continues to be strong. 4Q17 saw a supportive macro and policy environment with credit spreads tightening across asset classes.