Last month we learned about the new $30 million investment received by Upgrade from the Portuguese digital bank Banco BNI Europa. On the face of it this was not that remarkable, Upgrade has attracted many investors and BNI Europa has demonstrated their commitment to the marketplace lending space with many other investments.
But what caught my attention was the way this deal was structured. In reality BNI Europa did not actually purchase Upgrade loans, they invested in a privately placed bond that was backed by Upgrade loans. This bond was issued by Fintex Capital.
I reached out to Robert Stafler, the CEO and Co-founder of Fintex Capital based in London, to learn more about this transaction. Fintex was founded in 2015 and Robert has been a frequent speaker at our LendIt Europe events so I have gotten to know him and his company reasonably well over the last few years. He agreed to chat with me to explain how their investment structure works.
Fintex Capital SA is the company’s Luxembourg-based proprietary securitization vehicle. They create a bespoke program for every client, one tailored to the specific needs of the client. This is a pass-through securitization meaning there is no fixed coupon on the bond, the bond simply passes through the economics of the underlying assets less a management fee for Fintex.
The Fintex bond is capital markets friendly as it is cleared through Euroclear and has an ISIN number (XS1772189442) so details can be viewed on a Bloomberg terminal. The bond can be increased to as much as $200 million if needed through tap issuance. The loans can be sold directly into the bond which results in no accrued interest leakage unlike the pass-through or cert deals done in the US. Even though this deal just became public in July Fintex has been buying loans on Upgrade’s platform since April and had fully deployed the $30 million by mid-June.
When I asked Robert about exactly what value Fintex provides for investors he had this to say: [Read more…]