International law firm Simmons & Simmons has advised Funding Circle Limited (‘Funding Circle’) on the £129m securitisation of SME loans originated through Funding Circle’s online lending platform.

A first for Europe’s securitisation market, the deal closed on 10 May 2016 and was arranged by Deutsche Bank AG, London Branch. The loans being securitised were made to British small and medium sized enterprises (‘SMEs’) through Funding Circle’s marketplace lending platform, and were originated by KLS Diversified Asset Management LP (‘KLS’), a US asset manager, which was the sponsor on the securitisation. Simmons & Simmons advised Funding Circle in its capacity as servicer of the loans and operator of the Funding Circle platform.

The Funding Circle group operates marketplace lending services which allow investors to lend money directly to SMEs. Since its founding in 2010 to 31 January 2016, Funding Circle has facilitated approximately £1,000,000,000 in loans to SMEs in the UK. The lending base of the Funding Circle marketplace comprises retail investors, institutional investors, UK government-backed entities, a number of UK county councils, high net worth individuals and family offices, and Funding Circle SME Income Fund Limited, a registered closed-ended collective investment scheme that invests in credit assets directly and indirectly through the Funding Circle marketplaces.

Securitisation involves the repackaging of illiquid assets – such as loans – and issuing bonds backed by this pool of assets. As such, it allows for the capital markets to fuel more lending to SMEs throughout Europe, a market that has traditionally been reliant on the banking sector. With the introduction of the Capital Markets Union, and an increasing reliance by policymakers on capital markets funding to help capital flow throughout Europe, securitisation is expected to play an increasingly significant role in providing efficient financing for lenders on marketplace platforms.

Commenting on the transaction, partner and head of the firm’s asset-backed finance and securitisation team, Michael Lorraine, said: "We are pleased to continue advising Funding Circle, particularly in this instance on a market first transaction, demonstrating the capability of the firm's securitisation practice and our role as one of the leading law firms advising in the international FinTech sector."

The Simmons & Simmons team was led by partner Michael Lorraine (head of the firm’s asset-backed finance and securitisation team), assisted by James Bresslaw (partner, banking) and Kate Cofman-Nicoresti (senior associate, capital markets). Other key members of the team include Penny Miller (partner, financial services regulatory), Nick Cronkshaw (partner, tax) and Laura Allwright (associate, tax).

The firm also recently advised Funding Circle SME Income Fund Limited on its initial public offering and £150 equity raise in the last quarter of 2015.