Alternative Finances

Citi Says ‘No Thanks’ To Lending Club

In the continuing emergence of details surrounding Lending Club and its woes in the wake of the resignation earlier this month of its chief executive officer, Reuters reported on Friday (May 20) that Citigroup backed off from supporting the company.

The newswire said that a May 12 memo from the banking giant to regulators said that it “had declined a request” by fellow banking outfit Jefferies to help calm the markets overall, and in contrast, Citi decided to move to freeze its exposure to the online marketplace at large in the wake of CEO Renaud Laplanche’s resignation.

According to the newswire, the memo stated: “While Citi believes that overall due diligence and lending quality of Lending Club is good, it is … investigating the situation and is not yet prepared to do this.” The memo itself was tied to minutes of a call taken between the firm and the Office of the Comptroller of Currency and also noted that the online lender had “sufficient liquidity to carry it through the next few weeks.”

The news comes in the wake of disclosures via SEC filings that investors had been backing off giving investments to Lending Club, which could be a development with a material impact on operations.

The firm itself issued a statement asserting that its financial position is strong, tied to $900 million in cash holdings and another $120 million via line of credit.

It is Jefferies who bought the loans, totaling $22 million, from Lending Club that did not meet the former’s criteria. In addition, it was uncovered that some application dates on several loans had been falsified. Jefferies halted plans for a new securitization as details of the falsified documentation emerged. Sources told the newswire that institutional investors were in discussions to buy up Lending Club loans in a quid pro quo that would offer up equity stakes in the company.

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