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LendingClub's Negative Press Blitz Continues

LendingClub's Negative Press Blitz Continues

An $800 million LendingClub Corp (NYSE: LC) fund that invests in the company’s online consumer loans is expected to report its first monthly loss in the past 64 months in June. According to a letter to investors from LendingClub CEO Scott Sanborn, LendingClub’s Broad Based Consumer Credit (Q) Fund’s June return “is likely to be negative.”

The fund is LendingCub’s largest and has regularly returned around 0.5 percent per month throughout its five-year history. However, default rates on the fund’s loans have begun to rise in recent months and returns have dropped, prompting a number of investor redemption requests.

The Wall Street Journal’s Peter Rudegeair reported that as of June 17, LendingClub had received $442 million in redemption requests representing about 58 percent of the value of the fund. In response to the large number of redemption requests, LendingClub announced it was placing restrictions on withdrawals and would be considering winding down the fund entirely.

Related Link: Is The Marketplace Loan ABS Market Just Like The MBS Market A Decade Ago?

Sanborn attempted to reassure concerned investors that the negative June return was due to an increase in borrower interest rates designed to lure new investors to the fund.

LendingClub is scrambling to protect its reputation amid stories of rising default rates, fund underperformance and the scandalous departure of former CEO Renaud Laplanche earlier this year. In the past two months, LendingClub’s stock is down 44.1 percent.

Disclosure: The author holds no position in the stocks mentioned.


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