(Bloomberg) -- Mpower Financing's bet on the American Dream — bundling the future earnings of international students into bonds for Wall Street — is now being squeezed by America First.
The firm, which counts asset managers Tilden Park Capital Management and King Street Capital Management among its backers, provides loans to global students mostly studying STEM and business programs. It's expanded using a classic Wall Street playbook: securitizing those loans into bonds, betting the high earnings power of its graduates will guarantee investor returns.
That model is now under scrutiny as President Donald Trump's immigration policies stifle student arrivals from regions like China, India and Africa. Late last month, the firm postponed an effort to sell asset-backed securities being led by
Mpower's borrower pipeline has shrunk amid the immigration crackdown, some of the people said, asking not to be identified discussing private information. About 92% of Mpower's students come from the global south, it said in a 2024 report, a region encompassing Africa and Asia that's been impacted by the restrictive mandates.
Representatives for Washington DC-based Mpower, Tilden and
Securitization Strategy
Mpower had made securitization a recent funding cornerstone, helping grow its lending to more than 25,000 borrowers from 150 plus countries, according to its website. At the end of last year, it had facilitated more than $900 million of loans since its 2014 inception, according to a report from ratings firm Morningstar DBRS.
But its plan to sell nearly $250 million of bonds hit a hurdle after some potential investors spooked by Trump's policy shifts balked during the effort's early pitches. The downfall of UK property lender MFS and US subprime auto company Tricolor Holdings have also put a spotlight on asset-based lending.
Mpower decided not to move forward with the deal after filing a so-called 15G form, typically a signal that a company will sell bonds. Still, some potential investors were told it may revisit the deal at a later date, some of the people said.
One issue was the collateral, according to the people. The deal was slated to be backed by roughly 7,500 loans, with an aggregate principal balance of about $227 million, according to Morningstar DBRS, which had assigned the deal provisional ratings. Most of the borrowers — roughly 35% — came from Zimbabwe, followed by 17% from India, then Ghana, Nigeria and Kenya.
The administration has suspended certain visas for Zimbabwean nationals including for students, and has paused visas for nationals of many other African countries. Last year, it enhanced vetting processes to include reviews of student applicants' social media.
Yeshiva University
To be sure, about 90% of the student loans backing the planned deal were tied to science, technology, engineering and mathematics, or STEM programs — which generally lead to higher paying jobs — according to Morningstar DBRS.
Yeshiva University accounted for the largest share of the loan pool at 11%, followed by Northeastern University at 5% and George Washington University at 3%. A portion of the Zimbabwean borrowers are Yeshiva students, according to one of the people.
"Many students work directly with third-party lenders to supplement scholarships and on-campus work-study," a Yeshiva University spokesperson said by email.
Mpower had discussions with both Morningstar DBRS and Kroll Bond Rating Agency about grading the planned deal and submitted collateral and performance materials to both firms, according to one of the people. Kroll, which had rated Mpower's previous transactions, was not engaged on the transaction, the person said.
A representative for Kroll declined to comment. Representatives for Morningstar DBRS didn't have an immediate comment.
'Proprietary Algorithm'
Though student loans are a standard asset for securitization, Mpower touts its "proprietary algorithm" to analyze a student's future earnings rather than just past credit — which they may lack.
Mpower students who graduate and find US employment see their pre-graduation household income increase by an average of 15 times, according to the company's 2024 report.
But the administration's overhaul of the H-1B program, the most popular visa for white-collar professionals looking to work in the US, has made future employment less certain. For the first time, successful sponsors for immigrants arriving from another country will need to pay a $100,000 fee.
"Because employer-sponsored work visas are generally difficult to obtain, and subject to the H-1B lottery, securing long-term employment within the US remains uncertain," Morningstar DBRS wrote in its report. "Borrowers that are forced to leave the US are at risk of obtaining jobs that are less lucrative than comparable jobs in the US."
Shareholder Lawsuit
Mpower is also fighting a shareholder lawsuit filed last year over a 2025 financing deal with Tilden Park and King Street. The plaintiffs allege the transaction would be dilutive and was pushed through without a shareholder vote.
The deal came about because in early 2025, Mpower needed short-term financing to comply with debt covenants, which required a minimum of $17 million in cash by the end of January, according to the lawsuit. Through 2024, the company had "appeared to be doing well" with increasing loan applications and approvals, according to the lawsuit.
The defendants, including Mpower, Tilden Park and King Street, denied the allegations in a November filing, saying the transaction secured much needed financing.
Representatives for Mpower and Tilden Park also declined to comment on the lawsuit. Representatives for King Street didn't respond.
New Products
Meanwhile, Mpower has introduced a product that refinances in the US loans that were originated from students' home countries, according to one of the people. The rollout was accelerated because of Trump's policies, the person said. In March, Mpower launched a loan for US citizens and permanent residents.
Mpower was founded by Manu Smadja and Mike Davis — both former international students.
Smadja, originally from France, has said French banks wouldn't lend to him as a US student without using his parents' home and savings as collateral, while US banks wouldn't lend because he didn't have a US credit score.
--With assistance from Charles Williams.
(Updates with comment from Yeshiva University in the 13th paragraph.)
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