A rise in default rates has surprised investors in a securitized offering. Should default rates continue to rise, cash flows to investors will be diverted from paying interest income to paying back principal early.
Online lenders across industry cope with weaker performance SoFi bond investors may end up losing out on interest payments Social Finance Inc.’s online borrowers are defaulting at higher rates than underwriters for one of its bond deals had expected, the latest sign that an industry that hoped to upend banking is now getting tripped up by bad loans. Losses on the company’s personal loans were high enough to breach key levels known as “triggers” last month on a bond deal issued in 2015 and backed by the loans, according to analysts at Morgan Stanley. If defaults keep rising, investors in bonds could end up missing out on expected interest payments.