Funding Circle to embark on seventh securitisation

Funding Circle is getting set for the securitisation of a second portfolio of US loans.

This will be the peer-to-peer business lender’s seventh securitisation of loans across all its markets.

Ratings agency Moody’s has prepared a pre-sale report for the package, called the Small Business Lending Trust 2020-A.

It will comprise 1,930 loans originated through its US business.

The aggregate loan balance is $246.7m (£188.8m) with an average interest rate of 14.2 per cent. Of these, $181.5m are class A notes that Moody’s has given a provisional A3 rating, with class B rated as Baa3.

All the loans are due to mature by December 2024.

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Moody’s said the expected net loss rate assumption is 13.8 per cent after considering a five per cent recovery rate.

The analysis said the portfolio is well diversified across different loans that aren’t too long.

However, it warns that there are risks in funds only being spread across three sectors, services, healthcare and construction.

The transaction is sponsored by Funding Circle itself, which Moody’s highlights as a risk warning it is still relatively new and inexperienced in terms of securitisations.

Funding Circle’s first US securitisation took place in August 2019.

Its first US securitisation deal was valued at $198.45m (£163.85m), comprising four tranches of notes.