New letter to loan investors...
I'm Scott Sanborn, President and acting CEO of Lending Club. I've been on Lending Club's leadership team for the past six years as Chief Marketing Officer and Chief Operating Officer.
I know you have questions about the events of the past week and what it means for your investments.
Here are answers to a few questions we've heard this week:
• What's happening with my assets? Nothing. Your investments are still yours. The performance of loans facilitated through the platform remains robust. We are servicing and processing borrower payments like we always have, and the interest and principal payments that borrowers make will continue to be passed on to you as they were before.
• What's the status of Lending Club's business? We reported strong financial results for Q1 2016. We had solid originations, operating revenue, and adjusted EBITDA, despite a difficult economic environment. We facilitated $2.75 billion in loans and also reported a substantial amount of cash and securities - $868 million.
• Where is Lending Club going from here? We're intensely focused on restoring our investors' confidence. We've talked to hundreds of our investors - spanning individuals to financial advisors to banks to large institutions - including some who are new to Lending Club. While some investors have paused, others have reiterated their interest. We remain committed to both our borrowers and investors, and are working day and night to prove to you that we deserve your trust.
• I'm worried about Lending Club's data - what are you doing to reassure me? On Monday, we took the first of many steps to restore investors' confidence in our data. We shared the observations of an independent forensic data change analysis that looked at over 10 million test conditions on approximately 673,000 whole loans sold over the last eight quarters. Excluding the loans previously identified as having an issue, 99.99% of the loans the independent firm tested display either no changes or changes explained by the normal course of business. You can read the full details here.
• Are you confident in Lending Club's management? Yes. Our Executive Team has been working together for the past six years and has deep expertise in credit, operations, marketing, finance, human resources and technology. We're also supported by one of the strongest Board of Directors in the industry. It includes Hans Morris (the former President of Visa and now our Executive Chairman), Larry Summers (former US Treasury Secretary), John Mack (former CEO of Morgan Stanley), Mary Meeker (a Partner at Kleiner Perkins Caufield & Byers) and other experienced executives.
• What happens if Lending Club goes bankrupt? First and foremost, we are not going out of business. Lending Club has a strong business, a large balance sheet and we are here to stay. We have $868 million in cash and securities, which could cover our costs for a long time. Second, Lending Club has no claim to the payments you receive from borrowers, since each Note is tied to a loan, and loan payments are passed on to Note holders. Third, with a $10.2 billion loan portfolio that generated over $18 million in revenue in the first quarter of 2016 alone, we could profitably service the existing Lending Club platform as a standalone business, even if we didn't facilitate a single new loan. Finally, and I am only mentioning this because some have asked, if all else failed we would transfer our loan servicing obligations to a third party backup servicer. We have a longstanding contract with a third party to service loans in the event Lending Club can't, so that you'd continue to receive borrower payments (regardless of LendingClub Corporation's status). See our prospectus for more detail.
• Why the Department of Justice subpoena? The Department of Justice often issues subpoenas in response to public disclosures such as ours, especially in light of the department's focus on financial services. The company is fully cooperating with the department's investigation.
Our Investor Services team has been working tirelessly to address as many of your questions as possible and I have full confidence in their abilities. Please do not hesitate to reach out by phone at (888) 596-3159 (7am-5pm PT, Monday through Friday) or email us anytime at investing@lendingclub.com.
We're working hard to make things right and I will continue to keep you informed as we move ahead.
Thank you for investing with us. We look forward to having you as an investor for years to come.
Sincerely,