Bayview Opportunity Master Fund is preparing its foray into credit-linked notes that reference SoFi student loans and is raising $296.2 million from the transaction.
The inclusion of a special-purpose vehicle, without the bank buying the credit protection, and the generation of excess spread make Bayview Opportunity Master Fund different in comparison to most other bank-issued CLN transactions, according to Moody's.
SoFi Bank originated the private education loans, and the transaction references a $2.4 billion pool of assets, according to a presale report from Moody's Investors Service. Note payments are linked to two tranched credit default swap (CDS) transactions, one related to the reference obligation between the issuer and SoFi Bank and SoFi Lending and the Issuer. The two SoFi entities stand in as the protection buyers, Moody' said.
The notes, benchmarked on the three-month Secured Overnight Financing Rate (SOFR), are all slated to have a legal final maturity date in June 2047, according to Moody's. The Asset Securitization Report's database suggests that the notes will price at par, with spreads expected to range from SOFR+145 on the AAA notes to SOFR+275 bps on the BBB notes.
Initially, the deal has a protection amount of 12.5% of the total reference pool and will equal the principal amount of the issued notes and class R notes. SoFi Bank and SoFi Lending will pay a monthly fixed premium of 1.26% per annum on the reference pool, and a floating premium of SOFR on the protection amount for protection against losses on the reference pool.
The two entities will also receive compensation for any credit losses incurred up to the protection amount, Moody's said. All in all, according to Moody's, the notes benefit from initial hard credit enhancement ranging from 7.10% on the class A notes to 1.70% on the class G notes.
Aside from the excess spread, Bayview Opportunity Master Fund benefits from letters of credit (LOC) that the Federal Home Loan Bank of San Francisco issued on behalf of SoFi Bank, and Goldman Sachs Bank issued for SoFi Lending, Moody's said.
Such a multilayered deal has several other enhancements to keep the notes paying on time, according to Moody's. For one, the deal has a short life, as the notes have a legal final maturity date of June 2047. The reference pool is also high quality, with an average outstanding principal balance per borrower of $54,503 and a weighted average (WA) fixed interest rate of 4.65%.
Moody's assigns ratings of Aaa to the class A notes; Aa2 to the class B notes; A2 to the class C notes and Baa1 to the class D notes. DBRS Morningstar assigns ratings of AAA to class A; AA to class B; and A and BBB to the classes C and D notes, respectively.
