By Joy Wiltermuth
NEW YORK, May 12 (IFR) – Online lender Darien Rowayton Bank’s US$203m student loan securitization saw strong demand this week, despite turmoil embroiling the marketplace sector from fallout at Lending Club.
Orders for DRB’s three-tranche bond – its first to get Double A ratings from Moody’s – topped US$400m, said Gary Lieberman, the company’s chairman of the board.
“It was more than two times oversubscribed,” Lieberman told IFR. “People might not be interested in buying consumer loans right now, but a lot were interested in our loans.”
The demand allowed DRB to trim its borrowing costs in the ABS market from levels earlier in the year.
The new US$143.7m 4.39-year class of Double As, for example, cleared at 180bp over interpolated swaps, or 27bp tighter than where a similar DRB A2/AA(low) Moody’s/DBRS class priced in February, according to IFR data.
“People are talking about a choppy market, but we are not experiencing it in our paper,” Lieberman said.
Secondary trading in marketplace ABS paper, meanwhile, has been extremely uneven since Monday, when Lending Club CEO Renaud Laplanche resigned.
He stepped down after an internal probe found the company had sold a single investor US$22m of loans that did not meet the investor’s specifications. (Full Story)
That investor was Jefferies, which along with Goldman Sachs reacted to market jitters by putting a halt on their plans to securitize Lending Club paper they had purchased. (Full Story)
“There is no indication that investors are dumping, but there has been nervous selling,” said Jason Merrill, a structured finance analyst at Penn Mutual Asset Management.
On Thursday, a slice of the B/BB rated class from Citibank’s last securitization of Prosper Marketplace loans in March saw a cover bid in the 950bp area but didn’t trade, according to data provider Empirasign.
Three dealers were talking the bond at more optimistic levels in the mid-high 700s range before the auction.
DRB has refinanced about 13,000 student loans since 2013, mostly consolidated student debt owed by doctors, lawyers, nurses, dentists and MBAs, according to a DBRS presale report.
Of that total there have been only five defaults, two of which were the result of death and one from a total disability, Lieberman said.