The last few months have been a dress rehearsal for P2P Lending ahead of a credit cycle turn

Losses on a $126 million deal of loans originated through CircleBack Lending Inc. and put together by Jefferies Group LLC have already overwhelmed the trigger value embedded in the bonds, according to data from Morgan Stanley. That would normally mean cash flows due to investors in the lower tranche of the deal are diverted to more senior bondholders, the bank suggested.

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