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Ldger announces secondary market auction for $9 mil Prosper loans

Ldger is conducting their second auction for Prosper whole loans on Wednesday June 8th at 2pm EDT. The auction will cover $9mm in committed selling interest across 4 sellers with a further $18mm from 2 additional sellers being prepared to be made available in the auction. Ldger signed-up 39 auction participants to date with hopes of adding additional participants by auction day.

About the company

Ldger is a New York-based start-up looking to create a common securitization platform for the marketplace lending industry. The start-up was founded by Miles Cowan, Hyung Kim, Zachary Smith and Ossip Kaeh. Miles was a M&A lawyer at Dentons, Hyung was an interest rate options trader at Credit Suisse and Barclays, Zachary is the tech side entrepreneur and Ossip is the tech genius who was the chief architect of Click and Buy(a global payment platform).

According to Hyung Kim “Ldger’s platform allows current holders of marketplace originated debt to upload their loans, structure those loans in a securitization, run cashflow scenarios, and lastly offer out that securitization for sale. The offer can be standalone or they can elect to submit that securitization for other debt holders on our platform to participate as a group — crowd securitization.” They have also started integrating with the available api’s from several originators and are educating and adding new originators.

The current process versus new paradigm being created by Ldger:

Current System Ldger Platform
Purchasers have no visibility at loan level Full transparency every month at loan level
High costs of securitization prospectus Upload on Ldger Platform
Underwriting and warehousing process Automatic on platform
Assigning to SPV Same
Conversion of the pool into divisible securities Same
Sale to Investors Purchasers can request securitization creation seeking particular type
Servicing by originators Same
The process is archaic and inflexible. Process can take up to 2 months Process can be completed much faster.
Min $50-100m Min $5-10m

The current system of securitization is a 2 month tedious process of underwriters executing the deal. The resulting costs forces deals to be in the $100 mil plus range and makes deals in the 1-20 million range prohibitively expensive.

1st auction

The 1st auction help at the beginning of April 2016 for Prosper whol loans for a total package of $500k. It attracted 20 participants and about 10 active bidders.

2nd auction

The majority of loans in this second auctions are deeply seasoned with an average loan age from 15 to over 20 months. In this asset class, seasoned loans have historically experienced 1-2% in annual losses while new loans have experienced 3-5% in annual losses. While the market is the ultimate arbiter, given the expected higher returns due to the seasoned loans in this auction, it will be particularly interesting to see if the whole loans are sold above par and how many premium bids it attracts.
Currently, all auctions participants  do not pay any fees. Future auctions will require members to pay monthly subscription fees with eventual transaction fees once a broker-dealer partnership is established.
The company plans to conduct bi-weekly auctions for multiple sellers and buyers. The auction currently supports Prosper whole loans but will expand to include additional marketplace lending platforms.

Establishing a secondary market

Establishing a secondary market is a key requirement to increase the comfort for all market participants. It will allow platforms to recycle or raise more capital to origination more loans faster and easier. A secondary market will also allow for price discovery and to get market valuations on loans from different originators. And last but not least, a secondary market will allow for liquidity which will raise the level of comfort for anybody buying whole loans of all types.

The main difficulties in building a secondary market are regulatory, as well as pricing, and standardization. Ldger solution of temoplate-based securitization may be solving all these issues.

 

Author: George Popescu

George Popescu
George Popescu

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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