Update of Peloton Interactive LLC
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Wall Street has found a way to take advantage of some of the safest consumers in the United States. A debt slice backed by a bunch of loans for people who buy the popular Peloton fitness bike.
Affirm, the market leader in “buy now, pay later” services where customers pay in installments, has sold hundreds of millions of dollars in loans for Peloton equipment such as indoor bikes, bike shoes and weights. transaction.
Since 2020, the company has raised more than $ 2.2 billion through six transactions. Three broadly reflect Affirm’s broad loan portfolio, and three are a collection of unsecured, interest-free loans. Peloton customers, These people said. They total $ 845 million.
Affirm’s latest Peloton-backed transaction senior tranche is the most protected from the underlying borrower defaults and offers over 1% coupons. This is only about 0.2 percentage points higher than the equivalent US Treasury bond when pricing the transaction. During April.
While the deal highlights some of the financial magic that helped boost the boom in paying now during the pandemic surge in online shopping, low yields are most appreciated by investors. It suggests that it is keen on exposing to individual borrowers. In the United States.
proton Had benefited during Pandemic from Rapid increase in home fitness.. Its static bikes are some of the most expensive on the market, starting at $ 1,495 and rising to nearly $ 3,000 with accessories. Customers tend to be wealthy with a very high FICO score, which is a measure of the quality of consumer credit in the United States, and have a history of very low loan default rates.
Affirm offers a 12-43 month interest-free loan for Peloton purchases. Peloton provided approximately 20% of online lenders’ revenue of $ 870.5 million during the fiscal year ending June 30, 2021.
Some of the loans pass through Wall Street securitization machines and are packaged to support the payment of new debt purchased by investors such as asset managers like DoubleLine Capital and insurance companies like MetLife. ..
Francisco Paez, head of structured product research at MetLife, said the product is particularly popular with insurers seeking “safe and predictable cash flow.”
“Given the current pricing environment, we find these particular securitizations attractive because they provide a strong value relative to the amount of risk,” Paez added.
According to DBRS Morningstar’s assessment document, the transaction raises additional capital by securitizing loans to a large number of consumers in more than 11,000 merchants, as well as customers of its largest partner, Peloton. It is part of Affirm’s broader strategy of doing. ..
Affirm does not disclose the securitization loan structure to sell. Transactions backed by Peloton loans are even less disclosed because they are personally traded with investors.
However, according to the DBRS valuation document on the latest $ 500 million transaction from Affirm, including loans from both Peloton and other merchants, securitization has an average principal balance of $ 585, a million. Included over individual loans. Due to the short-term nature of the loan, the transaction is replenished with a new loan because it averages less than a year. Affirm is set for 2026, but will be issued until the maturity of transactions that may come earlier.
“Ultimately, the performance is very good thanks to the underwriting,” said Imran Ansari, who led the evaluation of the transaction at DBRS Morningstar. “Loans have low balances and low monthly payments, which reduces the stress on borrowers’ payments.”
Representatives of Affirm and Peloton declined to comment. Double Line declined to comment.
Peloton Bike Loan Sold To Avid Wall Street Buyers
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