LendingClub in Discussion with Citigroup for Loan Financing

LendingClub Corporation (LC – Snapshot Report) is said to be in discussion with Citigroup Inc. (C – Analyst Report) to get financing for its future loans. The news about this prospective deal was first reported by the Wall Street Journal.

According to a person with knowledge of the matter, Citigroup may arrange more funding for the debts that LendingClub provides either by buying loans or providing financing for others to do so.

We are productively engaged with LendingClub on a number of fronts, a spokeswoman for Citigroup said in an e-mailed statement.

If the deal comes through, it will help LendingClub to restore investor confidence, which was shaken after the surprise resignation of the companys founder and chief executive officer, Renaud Laplanche. This subsequently led buyers of the companys loans to pull out causing further damage to investor confidence.

Troubles started for the online loan platform after the forced resignation of Laplanche following an internal review that revealed a violation of the companys business practices.

The internal investigation was into sales of $22 million in near-prime loans to a single investor. The company said it made the sale in a fashion that went against the investors instructions. Some debts were misdated and Laplanche failed to properly disclose an investment.

The resignation came after LendingClubs board discovered that employees had falsified data on some loans sold to an investment bank, Jefferies. In its quarterly filing, LendingClub revealed that several large investors are reluctant to invest and have paused their investments in loans in the wake of Laplanches resignation. This could have a material effect on the companys performance.

Last year, Citigroup and LendingClub had entered in a separate tie-up to facilitate up to $150 million in loans designed to provide more affordable credit to underserved borrowers and communities.

According to a Wall Street Journal report earlier this month, The Goldman Sachs Group, Inc. (GS – Analyst Report) had been working with LendingClub to help it determine the best way to access capital markets.

Currently, LendingClub holds a Zacks Rank #4 (Sell). A better-ranked firm in the same space isEuronet Worldwide, Inc. (EEFT – Snapshot Report) with a Zacks Rank #2 (Buy).

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