Loans Provider Zopa Receives AAA Rating
10 Dec 2019
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- Zopa announces largest ever securitization of loans of ~£245 million
- The loans receive AAA rating which is the first for a P2P securitization
- The securitization shows confidence in Zopa providing high-quality loans
The latest securitization of loans of secured car finance provider Zopa is one of the largest to date. Deutsche Bank arranged the £245 million securitizations, which jointly led with Standard Chartered Bank. The car finance marketplace continues to expand after Fix Auto recently introduced a new car finance scheme.
Peer to peer lender Zopa loans receives AAA rating
It is the third securitization of loans originated through the secured car finance lender's marketplace. The loans have received AAA rating, which is the first-ever peer-to-peer securitization to get such a rating at issuance. Therefore this shows the market confidence exuded in the ability of Zopa to originate high-quality credit. Also, it demonstrates the company's approach to credit risk management and underwriting.
The lender’s loans are if different tranches and have been broken down into class A1 loans of £113.9 million and A2 tranche of £50 million. Equally, there is class B, C, D, E, F and Z1 of £24.4m, £18.3m, 13.4m, £11m, £8.5m, and £5.2m respectively. Class A1 and A2 have an AAA rating, while class B has an AA rating with class C given A high rating and class D an A low rating. The rest of the tranches have been assigned BBB for Class E and BB high for class F.
So far, to date, the lender has facilitated around £5 billion in unsecured personal loans to UK consumers. It makes it's the latest consumer P2P lending marketplace in Europe in terms of the amount already lent. Zopa ventured into the peer-to-peer financing model in 2005.
Zopa established a bank
As a result of the growth, the platform has seen the company recently established a bank entity. It is to help it expand its consumer proposition as well as product set. Currently, Zopa's bank has a restricted license.
Zopa CEO Jaidev Janardana indicated the company has continued to originate quality financing over the years. As a result, it has made the Zopa investment and attractive proposition and distinctive assets class. It is appealing to both retail and institutional investors. The CEO indicated that receiving the first-ever AAA rating for P2P securitization is a significant milestone.
First and second securitization occurred in 2016 and 2017
Zopa's other securitization of loans was in 2016 and 2017, involving £138 million and £205 million securitizations. Already Prudent Loan Investments and M&G Speciality Finance have committed to subscribe for the loans. As a result, they will hold around 50% of the minimum amount retained.
The latest decision comes after DBRS Morningstar and Moody's decision to upgrade the second securitization. Zopa offer secured car finance and unsecured personal loans online to low risk customers in the UK. Over 60,000 retailer investors are lending through the platform, as well as several institutions.