Funding Circle set for fourth securitisation

I would imagine they are bundling up decent loans and securitising them. They may spice them up with some of the cr@p you guys are selling (ie 2016/2018 cohorts) but not much, as everyone has been alerted by the investment trusts in this sphere just how cr@p these cohorts are.

So much of the action will be in bundling the 2019 cohorts which are (allegedly) better. Dumping the 2016/2018 loans will be a long process (as those here know) - because no one wants them as they’re “damaged goods”.

From the IT interim report issued in November 2018.

Since the Company published revised forward guidance on 29 June, it has realised a NAV total return of -0.4% (1 July – 30 November 2018) which represents a significant deviation versus earlier expectations. Evidence has now started to emerge through credit stress that this is largely, though not exclusively, attributable to the underperformance of certain UK loan cohorts from 2016 and 2017 and specifically in respect of younger businesses and/or those with guarantors with a low consumer score - typically borrowers assigned to Funding Circle’s higher risk bands. Funding Circle attributes performance degradation in this segment of the book to rising UK personal insolvencies as wages struggle to keep pace with the cost of living. Funding Circle has reacted to these developments by making changes to its pricing and credit strategy for the UK market during the past quarter, including incorporating data directly from an applicant’s bank into its latest risk model. It expects new loans written and acquired by the Company to yield 6-7% on an aggregated net basis following these changes. However, the Company’s exposure to the affected prior UK cohorts adversely impacts expected returns.

After this, of course FC downgraded returns further to 4.5% to 6%.

Those who are generous call it incompetence that will be corrected. The less generous are posting on here detailing the months it takes to flog the dead horses...

I don't think people understand the significance of the securitisations.  Roughly 40% of the loans FC originates now get sold on in bundles, and the proportion is going higher as individual lenders are too unstable.  So FC is turning more into a business which originates loans, bundles them, and sells them on to funds, basically disintermediating the banks. The impact on the management mindset is significant.  When they deal with a fund they will be sitting across the table from them, they will have to offer due diligence, and the fund will have the resources to dedicate to the diligence process.  Individual lenders, by contrast, have no negotiating power.  When it comes to allocating a loan to an institutional investor or an individual P2P lender, who do you think is going to get the good loans?

"The transaction was rated by two rating agencies, and its senior tranche was awarded an Aa3 / AA ratings by Moody’s and S&P respectively."


corporate.fundingcircle.com/media/press-releases/fourth-securitisation-funding-circle-loans-unveiled