LendingClub Said in Talks With Western Asset on Loan Buyingby and
New fund may buy up to $1.5 billion in loans, people say
Deal could bolster demand for LendingClub’s consumer loans
LendingClub Corp., looking to bolster demand for the consumer debts it arranges online, is in talks with Western Asset Management Co. to set up a fund that would purchase as much as $1.5 billion of loans over time, people with knowledge of the matter said.
Western, a subsidiary of money manager Legg Mason Inc., would commit to purchasing a certain amount of the lending platform’s loans each month, said one person, who asked not to be identified because the information is private. A deal may be announced in coming weeks, the person said. The agreement isn’t final, so the terms could change and talks may not result in a transaction.
“A division of Legg Mason is a reputable partner to do business with,” Bob Ramsey, an analyst at FBR Capital Markets, said in a phone interview. “The real question is, what does Lending Club have to give up in exchange for that firm commitment?”
LendingClub pioneered an online method of matching borrowers with investors who wanted to fund them, and became the first in its industry to go public in late 2014. But the company has hit a rough patch after years of rapid growth. In May, its founder and chief executive officer, Renaud Laplanche, resigned amid an internal probe into a botched loan sale. The shakeup sent LendingClub’s shares tumbling and has forced the firm to shore up relationships with investors who buy loans.
LendingClub’s shares jumped as much as 3 percent Thursday. They later pared those gains, slipping 0.9 percent to $4.60 at the close of trading in New York. The stock is down 58 percent this year.
A representative for San Francisco-based LendingClub declined to comment, while a representative of Western didn’t respond to a request for comment. Companies controlled by investor Tianqiao Chen built leading stakes in both Legg Mason and LendingClub this year.
Laplanche’s exit from LendingClub exacerbated a slowdown in investor demand for loans arranged online. LendingClub and several competitors have seen originations slump in recent months.
One rival, Prosper Marketplace Inc., also is in talks with investors who may commit to purchasing about $5 billion of loans over the next two years, according to a person familiar with the matter who asked not to be identified speaking about private negotiations. Soros Fund Management initiated those talks, another person said. Other potential buyers include Third Point and Fortress Investment Group or an affiliate, and investment bank Jefferies Group also is involved, one of the people said.
Spokesmen for the four firms declined to comment or didn’t respond to messages seeking comment. The Wall Street Journal reported those talks earlier Thursday.
Western, which specializes in fixed-income assets, had about $460 billion of assets under management as of June 30, according to its website.