OnDeck Closes $250m Securitisation

Small business lending platform OnDeck has closed a $250m securitisation.

OnDeck priced the deal in late April. As planned, the Notes were issues in two classes, consisting of $211.5m of Class A Notes and $38.5m of Class B Notes. The Class A Notes come with an annual yield to expected maturity of 4.250%, with the Class B Notes priced at 7.754%. Both sets of Notes have a final legal maturity of May 2020.

The securitisation was rated at closing by both S&P and DBRS. S&P attached a “BBB+” investment grade rating to the senior tranche of the deal, rating the B Notes "BB-". DBRS gave the Class A Notes an “A (sf)” rating and the Class B Notes received a rating of “BBB (low) (sf)”.

The net proceeds from the Notes offering were used to purchase a revolving pool of small business loans from OnDeck. The Notes are secured by and payable from that pool of loans.

OnDeck operates a hybrid lending model which involves both funding loans on its own balance sheet and through an institutional marketplace sales programme. The securitisation route represents yet further diversity for the platform.

This is OnDeck’s second securitisation to date, the first being a $175m offering from May 2014 (according to PeerIQ’s latest Marketplace Lending Securization Tracker). The successful deal closes at a difficult time within the US online lending space. The share prices of both OnDeck and Lending Club have tanked in recent weeks, following the dismissal of long-time Lending Club boss Renaud Laplanche. Much of the trouble in the US has emanated from a general cooling of institutional investor demand. We learnt recently that Goldman Sachs and Jefferies had put a planned securitisation with Lending Club on hold. The closing of the OnDeck deal is a positive sign for the sector – one which supports the notion that the problems that face the online lending industry at present do not necessarily revolve around credit.