- Talks may include offers to strengthen investor protections
- Company may relinquish up to 2% of shares outstanding
LendingClub Corp., seeking to restore confidence after the surprise resignation of its founder last month, is considering sweetening the pot in talks with loan investors.
The marketplace lender has held discussions with investors about offering stronger loan guarantees as well as a possible stake in the company, according to a person with knowledge of the situation who asked not to be identified discussing confidential matters. The company may grant warrants for the right to purchase stock and more protection to buyers that would force LendingClub to repurchase loans.
The firm may ultimately decide against giving up equity or providing stronger guarantees, the person said Thursday. If it does provide equity, the San Francisco-based company might relinquish warrants for as much as 2 percent of its shares as an incentive, the person said. While talks continue, the lack of an announcement suggests the parties may be far apart.
LendingClub, which makes money by charging origination and servicing fees, is attempting to boost demand for credit after Chief Executive Officer Renaud Laplanche resigned under pressure. The firm is reluctant to give up much ground on guarantees in fairness to those who have previously negotiated such agreements, the person said.
Och-Ziff Capital Management Group, Soros Fund Management and Third Point are among hedge fund firms that have in recent weeks discussed proposals to fund as much as $5 billion in loans, the Wall Street Journal reported Thursday, citing unidentified people familiar with the talks.
Representatives for LendingClub, Third Point and Och-Ziff declined to comment. A Soros representative didn’t immediately respond to calls for comment.
The company announced a leadership shakeup on May 9, and the revelation that Laplanche had resigned after internal reviews rattled debt investors and shareholders, cutting the stock’s price in half that week. The board cited two incidents: Staff had altered application dates on $3 million of loans before their sale, and Laplanche failed to disclose his interests in a fund that LendingClub was considering investing in.