Lendmark drops in second 2017 consumer loan ABS


Lendmark Financial Services takes a deeper look at the lowest-rated levels of its subprime borrower base in its second asset-backed transaction of the year.

Lendmark, an indirect subsidiary of The Blackstone Group, markets $ 250.2 million in bonds backed by a $ 282.7 million portfolio of high-cost subprime personal loans for its Lendmark Funding Trust 2017-2 transaction.

The guarantee consists of 62,080 mainly secured loans with an average interest rate of 27.42% on balances of $ 4,553 to consumers with average Beacon scores of 621. The pool includes a two-year revolving period which could cause some fluctuation in credit risk parameters such as pool deadline.

More than 13% of the pool’s loans are made to borrowers with origination scores below 549 on Equifax’s proprietary Beacon rating system, according to a pre-sale report by rating agency DBRS. This compares to just 1.3% in Lendmark’s first pool this year in June. (Beacon scores vary between 300 and 850, mirroring that of the FICO model).

Only 7.69% of loans went to consumers with Beacon scores above 700, compared to 25.25% in Lendmark’s 2017-1 deal, the report said.

The new agreement consists mainly of secured loans: 39% of these are hard-guaranteed by securitized assets such as automobiles, and 55.6% by other secured consumer goods such as furniture, computers, etc. renovation and furnishing work, etc. % concentration of unsecured loans in the pool during the revolving period, the initial unsecured part is only 5.93% of the pool.

DBRS expects to assign an AA to the $ 209.7 million senior Class A notes to be issued, which are granted a 26.8% credit enhancement. This corresponds to previous Lendmark agreements. Lendmark has completed three prior personal loan securitizations since Blackstone bought the company from BB&T in 2013.

Lendmark primarily creates and manages direct loans through its multi-state branch network as well as direct mail. These branches include the former Springleaf Holdings consumer credit bureau network that Springleaf separated from in 2015 as part of its own acquisition of OneMain Financial from Citigroup. The former Springleaf offices were later incorporated and renamed into the Lendmark footprint.

Lendmark’s $ 1.8 billion managed portfolio includes more than $ 1.2 billion in loans acquired from Springleaf as part of the merger.

DBRS assigned a deemed cancellation rate of 10.05% for the warranty; this is based on an allocation range between 5 and 12% for the entire Lendmark portfolio. Write-offs assume no recovery on unsecured or “other secured” loans and 10% on hard secured loans.

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