CommonBond, a marketplace lender specializing in private student loans, has closed its first securitization.
The deal, CommonBond Student Loan Trust 2015-A, issued a single tranche of class A notes with a weighted average life of 4.02 years and investment-grade ratings of A (high)’ and Baa2’ from DBRS and Moody’s Investors Service; the notes pay a spread of 165 basis points over swaps.
Morgan Stanley is the lead bank.
The class A notes benefit from 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’); it pays 110 basis points over three-month Libor.
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.
“This is a major milestone for CommonBond that reflects the quality of our underwriting, the strength of our team, and the scale of our platform,” David Klein, CEO and co-founder of CommonBond, said in a press release Thursday. “This securitization has meaningfully expanded our investor base among top institutions and money managers, and further positions us to meet and exceed our growth objectives over the coming months and years.”
Securitization isn't the only way that CommonBond has been diversifying its sources of funding. In February, the company announced a partnership with Nelnet in which Nelnet committed to purchasing at least $150 million of loans on the CommonBond platform. Nelnet also made an equity investment in the company.
To date, CommonBond has funded $200 million in loans.