Castlelake announced that Castlelake, together with a co-investor and minority partner Eltura Capital Management, has reached an agreement to purchase up to $4 billion of consumer installment loans from Upstart, an artificial intelligence (AI) lending marketplace. The purchase agreement consists of the acquisition of a back book of loans and a forward flow arrangement.
Upstart connects millions of consumers to 99 banks and credit unions who leverage Upstart's AI to approve more borrowers at lower loss rates, while simultaneously delivering the exceptional digital-first experience customers demand. More than $32 billion in loans have been originated on Upstart's platform since its inception in 2012. Through the transaction, Castlelake will leverage its experience underwriting consumer credit and small business loans to provide Upstart with the ability to upsize its business.
"Through this purchase agreement, Castlelake is pleased to partner with Upstart to expand its business in response to the increasing demand for affordable credit in today's economic environment," said John Lundquist, Partner, Specialty Finance at Castlelake. "Against a backdrop of increasing economic uncertainty, Castlelake is committed to helping support Upstart's mission of unlocking mobility and opportunity for millions of U.S. consumers."
"Upstart is excited to collaborate with a firm that we believe is an experienced and dependable capital provider through economic cycles," added Sanjay Datta, CFO of Upstart. "Castlelake's support will help ensure we have the resources to continue scaling the deployment of our AI models and expanding access to affordable credit for all consumers."
The transaction is a recent example of Castlelake's participation in the consumer credit and specialty finance sector, where it has both acquired assets and provided asset-based private credit. Other recent transactions include a £100 million facility commitment for a fintech company focused on expanding its revenue-based financing solution, and an agreement to provide credit to a tech-enabled trade financing platform built for small and medium-sized businesses.
"Whether through asset acquisition or bespoke private credit solutions, Castlelake has both the experience and flexibility to support companies operating in the specialty finance and consumer credit arena," said Isaiah Toback, Partner, Deputy Co-chief Investment Officer at Castlelake. "With sustained consumer demand for affordable credit and the ongoing retrenchment of traditional lenders, we believe that private capital represents an increasingly important part of the financing market for companies seeking steady, secure growth."