Goldman, Jefferies Pause Buying LendingClub Loans
May 10 2016 - 2:50PM
Dow Jones News
Two Wall Street banks handling bond sales for LendingClub Corp.
have stopped buying the company's loans as they review events that
led to the ousting of its chief executive, people familiar with the
matter said.
The move by Goldman Sachs Group Inc. and Jefferies LLC could
delay or jeopardize a number of closely watched securitization
deals for LendingClub. The banks are examining the company's
internal investigation that led it to remove its founder and CEO,
Renaud Laplanche, the people said.
The pause in loan buying from the Wall Street firms is delaying
LendingClub's plans to take hundreds of millions of dollars in its
consumer loans and package them into securities to sell to
investors.
Specifically, Jefferies had been looking to package about $150
million of LendingClub loans into bonds for investor sales in early
May. Goldman had not set a date for when it would do a
securitization deal for the San Francisco lending company.
Goldman has been working with the company in recent days to help
it determine the best way to access the capital markets, one person
familiar with the matter said. If a securitization deal is no
longer plausible, LendingClub and Goldman could seek to negotiate a
private sale with an investor, for example.
The developments have compounded one of LendingClub's largest
business challenges, finding enough investors to purchase its
loans. That had already been an issue for online lenders, but now
LendingClub has to continue lining up investors even as its
management team has been overhauled.
Mr. Laplanche was replaced by LendingClub board member Hans
Morris as chairman and by the company's president, Scott Sanborn,
as acting CEO. In addition to Mr. Laplanche, three senior
executives who interacted heavily with the funds that purchase
LendingClub loans resigned or were pushed out of the company after
an internal review found that $22 million of loans were sold to
Jefferies that didn't meet the firm's investment criteria.
The review also found that Mr. Laplanche didn't fully disclose a
personal investment he held in an outside fund that bought
LendingClub loans while he was advising the company's board to also
invest in the fund, The Wall Street Journal reported Monday.
In response to a question about LendingClub's planned
securitizations on a conference call with analysts Monday, finance
chief Carrie Dolan said the company needed time to speak with
investors about recent events before saying more.
"This will be a bit fluid as we assess over the next several
days and weeks the impact that would include the securitizations
that were contemplated," she said. The company declined to comment
Tuesday.
LendingClub had pursued the securitization deals as a way to
alleviate funding pressure caused by hedge funds and other
investors buying fewer loans from online lenders. The share of
LendingClub's first-quarter loan volume purchased by dedicated
funds fell to 32% from 45%, Mr. Sanborn said on the conference
call.
Telis Demos contributed to this article.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and Justin
Baer at justin.baer@wsj.com
(END) Dow Jones Newswires
May 10, 2016 14:35 ET (18:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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