Angel Oak Capital Advisors, the fixed-income investment management firm and Brightvine, a fixed-income blockchain platform provider, recently completed the asset-backed securities industry's first subordinated debt issuance using blockchain technology, raising $147.5 million.
Thirty-one community banks from 20 states issued the subordinated notes that secure the deal, which priced on July 6, according to a statement from Brightvine and Angel Oak Capital Advisors. All of the issuers have under $10 billion in assets. The deal is Angel Oak's third community bank subordinated debt securitization since 2018.
Subordinated notes are considered Tier 2 capital for banks, so using the capital markets to move them off of bank balance sheets supports growth, helps shore up the institutions' capital bases, or future acquisitions, according to a statement from Johannes Palsson, a senior portfolio manager at Angel Oak Capital Advisors.
Blockchain technology, also known as distributed ledger technology, applies immutable record-keeping, ensuring that all stakeholders on the transaction always have access to accurate and updated documents anytime a data point is updated, according to Joe Vellanikaran, CEO of Brightvine. In a typical securitization coordinating up-to-date documents and data across multiple participants is a manual and labor-intensive process, Vellanikaran said.
Jeffries Financial Group was structuring lead on the deal, while Piper Sandler was joint lead. The deal's notes priced over the three-month Secured Overnight Financing Rate, according to Finsight.
Moody's assigned a rating of 'Aa3' to the senior tranche, which priced at 300 basis points over the three-month SOFR. Throughout the rest of the deal, spreads ranged from 375 basis points over the three-month SOFR to 475 bps over the benchmark on the class C notes, according to Finsight. Moody's also assigned ratings of 'Baa3' to the class B notes and 'Ba3' to the class C.
"We are encouraged by the success of this deal and the industry's receptivity to a new era in capital raising," according to a statement from Sreeni Prabhu, co-CEO and managing partner at Angel Oak. "We will continue to explore ways to leverage the efficiencies of blockchain and drive value for our investors."
