A mix of real estate, enterprise and leveraged loans extended to healthcare obligors and private companies in the healthcare and life sciences sector will secure a pool of $390 million in asset-backed securities from the Oxford Finance Credit Fund III 2025-A transaction.
The deal issues notes through four tranches of class A and B notes, according to KBRA, the rating agency that assessed the deal. All notes have an August 2034 legal final maturity date.
Sixty-seven senior term loans extended to 53 obligors are in the collateral pool, with exposures to healthcare loans (70.5%), non-healthcare (12.2%) and life sciences (17.3%). The loans have a weighted average (WA) original term of 50 months with 42 months remaining, and a WA cash yield rate of 10.1%, KBRA said.
Oxford 2025-A includes a two-year reinvestment period, when cash flow from principal collections can be reinvested by purchasing additional loans that fit the deal's eligibility requirements, KBRA said.
KBRA assigns ratings of A to the A1 and A2 tranches; BBB to the B tranche and A to the liquidity facility.
MUFG Securities America is leading the deal, tang on the roles of structuring advisor, joint active bookrunner manager and liquidity facility manager.
In terms of credit enhancements, the structure includes 10.1% in excess cash flow, subordination and a liquidity facility sized to 3.0% of the outstanding notes balance. For overcollateralization, the class A and class B notes have a maximum advance rate of 72% and 82%, respectively.
The transaction's notes do bear some interest rate risk, KBRA said, pointing out that classes A2 and B will bear fixed rates, while the A1 and liquidity facility will be indexed to the Secured Overnight Financing Rate (SOFR).
Further, KBRA said, the deal requires that 91% of the supporting loans have interest payments on a floating rate index or a floating rate option. Among the floating rate loan, almost all of them, 98.1%, are indexed to the SOFR or have a SOFR option, while 1.9% are benchmarked to the prime rate. This exposes the notes to declining yield, potentially.
To mitigate that risk, Oxford 2025-A requires that new loans included in the deal must have a margin equivalent to 200 basis points or more over the related floating-rate benchmark. Also, the new loan cannot skew the pool's WA cash yield rate to less than 2.0% above the WA note rate.
