- Underwriter said to gauge investors’ interest in the debt
- Two other online lenders are in wings with bond deals
Jefferies Group is again considering selling bonds backed by LendingClub Corp. consumer loans, people with knowledge of the matter said, after disclosure issues at the online lender scuttled an effort earlier this year.
Jefferies is having preliminary conversations with investors to gauge interest in the bonds, and may decide not to go ahead with a sale, the people said, asking not to be identified because they aren’t authorized to speak publicly. The firm hasn’t fixed a deal size, but the original offering was expected to be around $150 million, people with knowledge said in April.
Wall Street banks are looking to sell similar bonds tied to loans made by at least two other online lenders in the coming weeks as well, according to a presale report and a person with knowledge of the matter. The offerings are a sign that markets for riskier debt may be thawing as record low bond yields spur investors to hunt for higher returns, while some of the world’s biggest money managers warn that risks are building up across global markets.
Representatives for Jefferies and LendingClub declined to comment.
Jefferies started marketing bonds backed by LendingClub debt in April, people with knowledge of the matter said at the time. The investment bank began buying loans to bundle into the securities earlier this year, and planned to focus on non-prime debt with an average interest rate of 28.5 percent. Then it discovered that the lender had changed documents associated with some of the consumer debt.
The problems with LendingClub’s documentation set off a series of events that culminated in the company’s chairman, chief executive officer and founder, Renaud Laplanche, stepping down. Some investors held off buying loans from LendingClub in the weeks after his departure, and the company’s shares plunged more than 50 percent. Its new CEO, Scott Sanborn, has since been trying to stabilize LendingClub by cutting costs, improving ethics training, and finding more reliable funding.
Among the other lenders looking to tap the market is Social Finance Inc., one of the biggest online providers of student loan refinancings. It has hired Deutsche Bank AG to underwrite, and may begin marketing a $575 million securitization toward the end of this month, encouraged by strong interest expressed in a similar deal they issued in June, a person with knowledge of the plans said.
Online lender Marlette Funding has hired Goldman Sachs to underwrite a securitization of its own. It could start marketing the notes as early as this week, according to a presale report from Kroll Bond Rating Agency and public disclosures tied to the offering.
Representatives of SoFi, Deutsche Bank, and Goldman Sachs declined to comment. An executive at Marlette didn’t return calls seeking comment.
Buyers of securities backed by online consumer loans have included DoubleLine Capital, JPMorgan Chase & Co. and BlackRock Inc., according to data compiled by Bloomberg that track ownership disclosures of the securities.