Good news for P2P and marketplace lending: Moody’s decides against Prosper downgrade

By Daniel Lanyon on Friday 22 July 2016

Alternative Lending

The ratings agency says “the likelihood of extreme underperformance” has somewhat diminished.  

Ratings agency Moody’s will not downgrade a series of securitised loans originated by the marketplace lending platform Prosper contrary to a warning it issued earlier this year, the ratings agency has said.

Back in February Moody’s Investors Service announced that some of a pool of Prosper’s loans securitised by Citi Group were on their watch list for and potentially heading for a downgrade. Moody's February forecasted was suggesting a 12 per cent lifetime loss. However, owing to: “the absence of substantial deterioration in Prosper's loans…as they continue to season”  the ratings agency has stood by its current rating three levels below investment grade of Ba3.

 “This reduces the likelihood of extreme underperformance of the collateral during its shorter remaining life, reducing the volatility around our loss expectations,” Moody’s said.

“Thus, the available credit enhancement coupled with Moody's upwardly revised expected lifetime losses results in an unchanged rating.”

Moody's expected lifetime losses for the pools  are based largely on the historical performance of Prosper's origination portfolio, the agency says. 

The rapid growth in marketplace and p2p lending of recent years has somewhat cooled in more recent months at the same time a slew of negative headlines have dogged the industry mostly involving the market leader Lending Club. This move will be a welcome one for many.

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