A fintech firm that billed itself as the first accessible distressed-debt investment platform has filed for bankruptcy.
Ironically, it blamed distress, among other factors.
El Segundo, California-based crowdfunding startup Peer Street and its affiliates filed for Chapter 11 in U.S. Bankruptcy Court in Delaware on Monday, citing harsh market conditions and dwindling venture capital funding for revenue shortfalls.
Reporting both assets and liabilities of between $50 and $100 million, the online platform will keep running while looking for buyers for its assets, including its mortgage loans and the technology platform, according to court records.
Founded in 2013, the company allowed investors to put money into distressed debt, warehouse financing and subordinate investments, as well as individual private real estate loans. Backers once included Andreessen Horowitz, World Innovation Lab and Colchis Capital, The Real Deal reported.
“Peer Street enables accredited investors, funds and institutions to access certain real estate-related debt investments that were historically difficult to invest in, and permits lenders and borrowers to access capital that has been historically difficult for them to access,” the company said in court records.
By sourcing loans from private lenders and brokers in 45 states, the firm was a master servicer and manager of loans on behalf of individual and group investors. Peer Street’s loans are secured by first liens, according to Bloomberg.
But the mortgage lending industry has cratered since 2021 as sharp rate increases sank demand for new loans and halted purchases of low-interest loans, the firm said. Venture capital, a critical source of funding for the company, declined markedly within the last year, it said.
“These market conditions severely impacted Peer Street’s business,” the filing reads. “Before 2022, Peer Street originated and sold a significant volume of whole mortgage loans to third party institutional purchasers, earning substantial premiums on these transactions. After 2021, the volume of these originations dropped precipitously.”
Peer Street has originated only $5.4 million in mortgages in 2023, compared with $385 million in 2022 and $695.8 million the year prior.
The firm received a Paycheck Protection Program loan of $2 million to $5 million in 2020 to retain 150 jobs, The Real Deal previously reported, though that wasn’t enough to stave off several rounds of layoffs between 2020 and 2023, according to Layoffs.fyi.
Peer Street’s staff, which numbered 281 in May 2022, has dwindled to 28, court records said.
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