It was almost seven months ago when the news first came out about a massive deal that was in the works at Prosper. But then nothing. Every time I checked in with Prosper about it since then they said it was still in process. Today, we learned that the deal has indeed closed and what a deal it is.
The official press release came out this morning. The details of the deal are pretty much what we learned back in August. A consortium of investors has committed to buy Prosper loans worth up to $5 billion over the next two years. The press release details who is in this consortium:
The investors in the consortium are affiliates of each of New Residential Investment Corp., Jefferies Group LLC and Third Point LLC, and an entity of which Soros Fund Management LLC serves as principal investment manager.
People familiar with the matter told me that the consortium has been buying loans at Prosper since Q4 last year. They also said that all loans are being purchased at par and there is no discounted servicing either. So, as far as profitability goes this is a fantastic deal for Prosper. Of course, there is one catch. The investor group will receive warrants for Prosper shares that will represent a 35% ownership stake in the company if they purchase the full $5 billion in loans in the two-year time frame.
The Wall Street Journal reported that Prosper will be starting its own securitization program in the second quarter and loans purchased by this consortium will make their way into these securitizations. Another interesting piece is that the consortium has lined up $1 billion in warehouse financing from the likes of Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley.