Castlelake logo is seen displayed in this illustration taken, May 4, 2022. REUTERS/Dado Ruvic/Illustration
WASHINGTON (Reuters) -Lending platform Pagaya Technologies on Monday announced an agreement to sell up to $500 million of its auto loans to asset-based private credit manager Castlelake.
In a statement, New York City-based Pagaya said the deal "has the potential to significantly accelerate Pagaya's auto lending platform."
The firms reached a forward flow agreement, whereby Minneapolis-based Castlelake has agreed to buy auto loans from Pagaya in the future for immediate capital payment.
Pagaya sources its loans through an AI-backed credit decision-making platform. It has reached partnerships with 31 lending partners since its founding in 2016, including in personal loans, point of sale, and auto loans.
“We look forward to supporting Pagaya as they continue to grow their technology and data-driven program in the auto lending sector,” said John Lundquist, specialty finance partner at Castlelake, in the statement.
The deal comes just weeks after the well-publicized collapse of two U.S. auto sector companies, raising fears of credit stress. Subprime auto lender Tricolor, which sold its loans to a variety of banks and private credit firms, declared bankruptcyon September 10. Auto parts supplier First Brands itself declared bankruptcy on September 29, revealing liabilities exceeding $10 billion.
“Recent headlines have reminded everyone in the market that confidence and caution must go hand in hand," Gal Krubiner, co-founder and CEO of Pagaya, told Reuters in a written statement.
"Our structure with established lending partners, rigorous dealer oversight, and multiple layers of third-party verification is designed to identify and mitigate risk early, while still enabling lenders to grow their customer base responsibly."
(Reporting by Matt Tracy in Washington, D.C., Editing by Kirsten Donovan)
