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.
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.
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