CommonBond, a marketplace lender specializing in private student loans, announced its first securitization Wednesday.
The deal, which will be backed by approximately $100 million in graduate student loans, has received an investment-grade rating of 'A (high)' from DBRS). It is expected to be rated four notches lower, at Baa3,’ by Moody’s Investors Service, according to a spokeswoman for SoFi.
Morgan Stanley is the lead bank.
The deal, CommonBond Student Loan Trust 2015-A, will issue a single tranche of class A notes with initial overcollateralization of 9.15% of the pool balance. That’s how much the value of the collateral exceeds the face value of the notes.
It is less than the 13.56% initial overcollateralization that another marketplace lender, Social Finance, offered on a $411.9 million private student loan securitization that closed Wednesday. Moreover, the OC on SoFi's senior tranches is targeted to each 18.86% in a matter of months.
SoFi’s deal is rated higher by both Moody’s (Aa3’) and DBRS (AA high’).
According to a presale report published by DBRS, the borrowers backing CommonBond’s deal have a weighted average credit score of 763, a weighted average income of $152,190 and a weighted average debt-to-income ratio of 31.2%.
The report notes that, since CommonBond’s inception, none of its loans have been more than 30 days delinquent.
Further mitigating risk is the fact that 72.4% of the loans were obtained by borrowers who have completed their education and are employed in order to refinance existing loans. The other 27.6% were originated by borrowers when they were in school loans; however of these, 15% have now graduated and are now employed.
As the marketplace loan industry has evolved from its peer-to-peer roots, securitization has become a more popular financing tool. Social Finance, which competes against CommonBond in private student lending, has now completed four securitizations.
CommonBond expects purchasers of its bonds to include banks, insurance companies and asset managers.