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Investing.com -- Pagaya Technologies Ltd. has completed a $399 million bond sale tied to subprime auto loans, but was forced to offer higher interest rates amid increased investor scrutiny, Bloomberg reports.
The fintech company structured the offering in seven parts, with the largest tranche of $112.7 million carrying AAA ratings. This portion priced at 1.5 percentage points above the benchmark rate, according to Bloomberg, citing a person familiar with the transaction who requested anonymity because the matter is private.
The pricing represents a significant increase from the initial guidance of 1.25 to 1.3 percentage points above the benchmark rate, indicating investors demanded higher returns.
The higher rates come as Pagaya faces more intense scrutiny from investors regarding its originate-to-sell business model. This increased caution follows the collapse of Texas-based subprime car lender Tricolor Holdings, which filed for bankruptcy in September.
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