| NEW YORK, July 29
NEW YORK, July 29 CommonBond, the online student
lender, has hired Morgan Edwards, formerly the head of middle
market lending and the head of leveraged finance for telecom,
media and technology at Macquarie Capital, as its
chief financial officer.
Edwards, who worked at Macquarie since 2008, will focus on
capital strategy at CommonBond, as well as fundraising and
growth. The company projects its loan originations will increase
to more than $1 billion in 2016 from $500 million at the end of
the year, and plans to pilot at least one non-student loan
product within the next 12 months.
"I spent my whole life underwriting credit risk," Edwards
said in an interview, noting that the current online lending
marketplace resembles the start of the leveraged finance market.
"This is the future. Things will evolve and there will be
offshoots of this model we haven't foreseen yet. This is a
fantastic platform and a phenomenal idea."
CommonBond closed in June its inaugural securitization,
CommonBond Student Loan Trust 2015-A, a portfolio of about $100
million of graduate student loans, according to a June 25 news
release. Morgan Stanley served as the lead underwriter of the
Peer-to-peer lending and online lending marketplaces are
growing, drawing support from firms including KKR & Co
and Apollo Global Management. Of the approximately $843
billion of consumer loans outstanding, Goldman Sachs said about
$209 billion are "at risk" to move to new players, with these
new entrants making up about 15 percent of the market in the
next 10 years from less than 2 percent currently. With increased
regulatory oversight and the elimination of the Federal Family
Education Loan (FFEL) program pushing banks out of the $1.2
trillion student loan market, there is also room for new
entrants in the student loan space.
Avant, an online lender, announced the launch of Avant
Institutional Marketplace, which allows institutional investors
to purchase loans originated by the platform, according to an
April 13 news release. It also announced a $400 million
financing agreement with KKR, Victory Park Capital and
Jefferies, according to the news release.
Another online lender, LendKey, announced in April that it
had secured a financing commitment from Apollo's MidCap
Financial, according to an April 14 news release.
"The combination of big data analytics and new distribution
channels allowed technology start-ups to disrupt traditional
banks, particularly in the consumer lending space," Goldman
Sachs analysts wrote in a March 3 report. "These new entrants
benefit from lower cost bases than banks, allowing them to price
loans at lower interest rates."
The rise of online marketplace lending has led the U.S.
Department of the Treasury to ask for public input to allow
policymakers to study the various models and products offered,
according to a July 16 news release.
"By soliciting public comments on this relatively new
industry, we hope to better understand the potential for online
technology to expand access to safe and affordable credit for
consumers and small businesses," Antonio Weiss, counselor to the
Treasury Secretary, said in the release.
Increased oversight by the Consumer Financial Protection
Bureau and the elimination of the FFEL program in 2010 has
changed the student lending space, with many large banks no
longer originating student loans and divesting run-off
portfolios, paving the way for new entrants, according to the
Goldman report. The bank estimates about $200 million of profit
from student loans could shift outside the banking system over
the next three years.
CommonBond, which funds and refinances graduate school
loans, announced two years ago that it raised more than $100
million of debt and equity from investors including The Social +
Capital Partnership and Tribeca Venture Partners, according to a
Sept. 4, 2013 news release.
Other investors include Vikram Pandit, the former chief
executive officer of Citigroup, Thomas Glocer, the former chief
executive officer of Thomson Reuters, and Tom Kalaris, the
former chief executive of wealth management at Barclays,
according to the news release.
CommonBond will announce Wednesday that it has appointed
Charles G.T. Stonehill, a managing partner at TGG Group, to its
board of directors. Stonehill previously worked at Morgan
Stanley and Credit Suisse.
As the company continues to grow, it plans to provide
additional products beyond student loans, with a pilot program
planned for the "near future," said Edwards, who also worked at
Bear Stearns and Morgan Stanley. CommonBond declined to comment
on specific products or timing.
"I see a fundamental sea change," in the lending
environment, Edwards said. "The bet I'm making is that I believe
business will get transacted differently. A whole new industry
is rising and I'm on board."
(Editing By Leela Parker Deo and Jon Methven)