WASHINGTON, Nov 3 (Reuters) - Lending platform Pagaya

Technologies ( PGY ) on Monday announced an agreement to sell up

to $500 million of its auto loans to asset-based private credit

manager Castlelake.

In a statement, New York City-based Pagaya ( PGY ) said the deal

"has the potential to significantly accelerate Pagaya's ( PGY ) auto

lending platform."

The firms reached a forward flow agreement, whereby

Minneapolis-based Castlelake has agreed to buy auto loans from

Pagaya ( PGY ) in the future for immediate capital payment.

Pagaya ( PGY ) sources its loans through an AI-backed credit

decision-making platform. It has reached partnerships with 31

lending partners since its founding in 2016, including in

personal loans, point of sale, and auto loans.

"We look forward to supporting Pagaya ( PGY ) as they continue to

grow their technology and data-driven program in the auto

lending sector," said John Lundquist, specialty finance partner

at Castlelake, in the statement.

The deal comes just weeks after the well-publicized collapse

of two U.S. auto sector companies, raising fears of credit

stress. Subprime auto lender Tricolor, which sold its loans to a

variety of banks and private credit firms, declared bankruptcy

on September 10. Auto parts supplier First Brands itself

declared bankruptcy on September 29, revealing liabilities

exceeding $10 billion.

"Recent headlines have reminded everyone in the market that

confidence and caution must go hand in hand," Gal Krubiner,

co-founder and CEO of Pagaya ( PGY ), told Reuters in a written

statement.

"Our structure with established lending partners, rigorous

dealer oversight, and multiple layers of third-party

verification is designed to identify and mitigate risk early,

while still enabling lenders to grow their customer base

responsibly."