NEW YORK, June 16 (IFR) - Social Finance is looking to sell
its debut rated bond backed by personal loans, the first such
deal since troubles at rival Lending Club cast a shadow on the
online loans sector.
SoFi has undertaken an aggressive campaign to distance
itself from Lending Club, widely seen as the leader of the
nascent online lending industry, in marketing the deal.
The company held at least a dozen meetings with investors,
sometimes without bringing along the two banks - Citigroup and
Deutsche Bank - that are bookrunners on the deal.
Investors told IFR that the San Francisco-based company has
also been contacting portfolio managers directly via instant
messaging as it seeks feedback from the buyside.
They said the company has been highlighting its focus on
high-earning professionals and its practice of keeping a sliver
of each loan on its own books to keep "skin in the game".
SoFi's eight-person capital markets team, which is headed by
Barbara Lambotte and Paul Fielding, has been part of the direct
engagement, they said.
The novel approach has raised some eyebrows in the market,
not least because of the thicket of complicated laws that govern
the marketing of securities.
"There are significant rules," one lawyer who works in the
securities industry told IFR. "It's really dangerous territory."
BANKS WILL STAY
A senior SoFi executive familiar with the matter confirmed
that the conversations took place, but insisted the company had
no plans to cut banks out of its marketing process.
SoFi simply wants to have regular contact with investors,
the executive said.
SoFi's in-house broker-dealer, SoFi Securities, has been
active in selling residual slices of each new securitization to
But while other ABS issuers such as GM Financial and GE
Capital also cultivate dialogue with bond buyers through their
investor relations departments, bankers said, SoFi's approach
was more intense.
Even so, SoFi appeared to be gaining better traction than
other personal loan ABS trades sold this year when its deal was
announced on Thursday.
Whispers on the single tranche, a 2.3-year US$379.8m class
of Single A rated notes, are in the area of swaps plus
It is expected to price next week, three sources said.
Citigroup in March was forced to pay investors 400bp over
EDSF on its Single A bond of securitized Prosper Marketplace
personal loans, after receiving pushback at 300bp.
That issuance program came to an abrupt halt in April.
SoFi's trade is backed by unsecured installment loans of up
to seven years to borrowers with high average US$140,000 annual
incomes and 763 credit scores, according to a Kroll Bond Rating
Agency presale report.
The company sold its first securitization of personal loans
last year, but that deal was unrated.
The SoFi offering comes roughly a month after the ouster of
Lending Club founder Renaud Laplanche and the disclosure that
some loans sold by the company had been tampered with under his
The beleaguered marketplace lending sector is struggling to
win back trust from investors concerned about slipshod
underwriting and rising default risk.
Prosper cut more than a quarter of its staff in May, and the
platform's loan volumes fell more than 10% in the first quarter
of 2016 from the previous quarter.
(Reporting by Joy Wiltermuth; Editing by Marc Carnegie and