Fintech firm Pagaya Technologies is preparing to issue a US$1bn securitization of marketplace consumer loans in advance of its upcoming IPO.
On September 15, the US unit of the Israel-based company agreed to merge with special purpose acquisition company EJF Acquisition and become a publicly listed company in a deal with an estimated enterprise value around US$8.5bn. Pagaya selects loans to invest in based on screening through machine learning, big data analytics and artificial intelligence. Pagaya typically invests in consumer debt from online lenders LendingClub, Marlette, Prosper, Avant and Upgrade.
The upcoming transaction, Pagaya AI Debt Trust 2022-1, will be first ABS issued from a new securitization vehicle, Pagaya Structured Products LLC. Overall, Pagaya has completed 21 consumer loan securitizations, raising more than US$7bn since 2018, according to Kroll.
The deal features three classes of notes. The biggest is a US$833.4m Class A with an expected A- rating from Kroll. It also contains a US$117.0 Class B and a US$129.6m Class C. Kroll is expected to assign BBB- and BB- ratings to the B and C tranches, respectively.
Proceeds from PAID 2022-1 are intended to go into a pre-funding account for loan purchases and a reserve account, and to pay certain transaction expenses, Kroll said.