Credit Rating Agency Rates UK P2P Platform

For first time in the UK P2P space, a regulated credit rating agency has conferred a rating upon a platform.

ARC Ratings has awarded the alternative mortgage lender LendInvest a rating of SQ1, which is the highest rating that the company can bestow. The level of the “Quality Assurance Rating” was based upon LendInvest’s ability to originate deal flow, and upon the platform’s underwriting and servicing abilities. No other European peer-to-peer lender has yet attained such a rating. 

ARC is registered with the European Securities and Markets Authority. The agency’s take on LendInvest is as follows:

"LendInvest displays strong corporate governance, a high level of transparency, and extensive systems and controls... The primary servicer rating [SQ1] reflects LendInvest's robust internal controls/systems, servicing experience in the real estate lending and collections industry, and recent financial performance."

Ratings activity has been slow to materialise within the UK market thus far. Roughly a year ago RateSetter secured a “risk score” of 1 from the investment analysis and research provider FE. An interesting insight, but the FE score is a far cry from the endorsement of a major credit rating agency – the like of which we’ve seen attached to numerous securitizations in the States. SoFi, for example, recently closed a $411.9 million securitization of refinanced student loans. Moody’s, Standard & Poor’s and DBRS gave the highest rated senior notes Aa2/A/AA (high) respectively.

The LendInvest rating may well be a product of increased institutional activity in the UK market. LendInvest is today around 70% financed by institutional investors. 

Christian Faes, CEO of LendInvest, offered his take on the ARC rating:

"The fact that LendInvest was able to get a rating from a regulated credit rating agency, is a positive step for the whole peer-to-peer marketplace lending market in Europe.Credit ratings agencies are understandably cautious when looking at new business models like marketplace lending. However, this represents a move towards the mainstream for peer-to-peer and marketplace lending, and a real coup for LendInvest."