Agora Plans Debut 144a Sub-Prime Auto ABS

Article reprinted from Refinitiv
Original publication date: February 2, 2021 
Author: Richard Leong

The privately-held company, which was founded in 2017, matches auto lenders and dealers with investors on its platform that employs artificial intelligence and machine learning to analyze the loans. It is now aggregating and looking to securitize more car loans in an effort to expand its investor base and achieve lower funding costs.

“We expect to do larger deals with increasing supply in the 144a market this year,” Agora’s chief revenue officer Chris Hawke said. “It would expand the universe of investors who can participate in our deals.”

Hawke, who had previously been a banker at Citigroup and Bank of America, declined to specify the timing for its 144a debut, but said the deal size would range in the US$100m-US$150m area. The Arlington, Texas-based company currently has over US$1bn in auto loans in inventory.

Agora’s US$100m private transaction in December featured a blended weighted average life of 1.8 years and a blended all-in spread of 300bp. The senior certificates are benchmarked against EDSF and the subordinate notes are referenced against swaps, according to Hawke.

The borrowers in the December deal had FICO scores in the mid-to-upper 500 range, which is considered “deep sub-prime” defined by the Consumer Financial Protection Bureau.

Agora is currently working with several banks to ready the 144a offering, which is unlikely to carry any credit ratings, said Hawke.

Agora’s progression in the ABS market comes as other larger fintech firms such as Affirm have increased their activity to fund their expansion in consumer lending.

“I can certainly see more fintechs like Agora enter the market but I must admit, the barriers to entry are fairly high so it’ll take longer than the next six to 12 months to see more activity,” said Prath Reddy, head of capital markets at Cadence.