Pandit-Backed CommonBond Gets Barclays, Macquarie Funding

  • $275 million in warehouse lines will fuel securitizations
  • Startup hires ex-Lehman banker Starr for capital markets role

CommonBond Inc., the student-loan venture backed by Vikram Pandit, lined up new funding from Barclays Plc, Macquarie Group Ltd. and others, as Wall Street firms pump more capital into the online lending boom.

The so-called warehouse lines provide CommonBond with an additional $275 million to make loans, according to a statement Tuesday. Once enough debt is originated using the funds, CommonBond will look to package it into securities that can be sold to investors, said David Klein, the company’s co-founder and chief executive officer.

“It allows us to continue to fuel a lot of growth that we’ve seen,” Klein said in a phone interview. This year, the New York-based company will probably surpass the $1 billion milestone for total loans created, he said.

CommonBond is among dozens of startups trying to make borrowing more efficient by using technology. Often called marketplace lenders, the ventures are rapidly gaining scale with backing from institutional investors and big banks. The industry helped line up $12 billion in loans in the U.S. in 2014, compared with less than $2 billion in 2010, according to Morgan Stanley.

Pandit’s Bets

Since his ouster as Citigroup Inc.’s CEO more than three years ago, Pandit has been helping seed new businesses looking to challenge traditional banks. In 2013, he was among investors including venture capital fund Social + Capital that plowed more than $100 million into CommonBond. The company is now increasingly working with established firms to further its expansion.

CommonBond also announced Tuesday that it hired Beth Starr, a former managing director at Lehman Brothers Holdings Inc. and Jefferies Group LLC, to head its capital markets efforts. Starr will help the startup build ties to Wall Street and develop other funding sources, said Klein.

“CommonBond is at the forefront of disrupting consumer finance, and I’m excited to be joining the team,” Starr said in the statement.

CommonBond packaged about $100 million in loans into securities for the first time last year and hired Morgan Edwards, a former Macquarie investment banker, to be its chief financial officer.

(An earlier version of this story corrected the spelling of Barclays.)

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