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GreenSky secures $6B funding commitment with asset manager; shares skyrocket

GreenSky Inc. has reached an agreement in principle for a three-year $6 billion forward flow arrangement with an institutional asset manager.

The partnership "both diversifies and reinforces" GreenSky's current bank partner funding model, Chairman and CEO David Zalik said in a statement.

Although the digital lender did not say which asset manager, the agreement marks GreenSky's first partnership since announcing it would open its doors to nonbanks to fund loans. That decision came in conjunction with the announcement that its board would explore strategic alternatives and just months after GreenSky announced that one of its biggest partners, Regions Bank, would likely not renew its partnership.

The Regions Financial Corp. unit accounted for $2 billion of GreenSky's funding. As of Sept. 30, GreenSky had $11.9 billion in funding commitments, of which $3.5 billion was unused, according to its latest quarterly filing. However, GreenSky also said in that filing that it extended its contract with one bank partner for an additional year on Nov. 11, but that partner lowered its commitment to $3 billion from $4 billion previously. Pro forma for that adjusted commitment, and before giving effect to the forward flow arrangements then under consideration, GreenSky's aggregate amount of unused funding was $2.4 billion as of Oct. 31.

The lender's Dec. 19 announcement also confirmed that GreenSky renewed its agreement with its largest bank partner for an additional year, extended a second bank partner agreement for an additional three years and reached an agreement to increase a third bank partner's commitment by $100 million.

"Consistent with GreenSky's mission to help businesses grow revenue at the point of sale while delighting their consumer customers, these funding relationships yield both flexibility and significant liquidity to fuel future growth," Zalik said.

GreenSky shares jumped more than 17% when the market opened Dec. 19 and remain elevated. Shares sit at $8.89 as of 2:45 p.m. ET on Dec. 20.

GreenSky's five largest bank partners — BMO Harris Bank NA, Fifth Third Bank NA, Regions, SunTrust Bank and Synovus Bank — funded close to 90% of the lender's commitments to originate loans as of Sept. 30. GreenSky does not disclose how much funding each bank in particular contributes. Its other partners are Flagstar Bank FSB, Ion Bank, Midland States Bank and Renasant Bank.

On a November call to discuss earnings, Zalik said interest from nonbanks was "far larger than we expected, and it exceeded the aggregate commitment that we have from our banks." The new funding option — open to insurance companies, institutional asset managers or government-sponsored pension plans — is meant to augment GreenSky's existing bank-based funding model.

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