SMB Lender OnDeck Gears Up For Asset-Backed Security Sale

OnDeck Capital, the small to medium-sized business (SMB) digital lender, is reportedly gearing up for its first bond sale after installment loan issuer Enova International Inc. purchased the firm in 2020, The Washington Post reported on Monday (April 26).

Unnamed sources in the Washington Post’s article indicated that the company is looking to sell asset-backed securities in four tranches.

In the presale report, analysts from Kroll Bond Rating Agency said, “As a result of COVID-19 related economic disruption, unemployment is elevated and may impact revenue of small businesses as consumers and businesses may be less inclined or able to spend.”

The analysts noted that small companies had experienced tough times during the coronavirus pandemic because of “elevated unemployment levels, complete lockdowns, capacity limits and social distancing measures.”

The deal is said to be one of a few sales of debt supported by small business loans in recent times. For example, Harvest Small Business Finance recently began selling an offering supported by unguaranteed debt.

Traditionally, Enova has been geared toward nonprime lending to people, with not as much of a focus on lending to small companies, the Washington Post reported, citing the Kroll report.

The AAA portion of OnDeck’s 2019 arrangement priced with an approximately 2.66 percent yield, the newspaper reported, citing data that Bloomberg put together.

The news comes after Enova reported in February that total revenue fell 24 percent from the fourth quarter of 2019 to the fourth quarter of 2020.

Enova noted that the ratio of consolidated portfolio net charge-offs as a part of average combined loan and finance receivables was 4.7 percent in the fourth quarter. It had $388 million in overall cash and marketable securities at the end of last year, with $453 million in available capacity on domestic committed facilities.

All in, Enova International reported $2.39 adjusted earnings per share on $264 million in total revenue for Q4 2020. The results exceeded analysts’ estimates of $1.26 per share in earnings on revenue of $250.37 million.