Kiavi Funding has sponsored the LHOME 2022-RTL 1 deal, issuing $271 million in revolving securitization notes secured by unrated residential transition loans. The transaction is the first deal in which Kiavi sold it residual interest.
The transaction also represents Kiavi’s first deconsolidated deal, given the sale of residual interest. Barclays Capital acted as the sole structuring agent, according to a statement from the company. Nomura Securities and Performance Trust Capital Partners joined Barclays as joint bookrunners and co-lead managers.
The notes will be issued through a capital structure with three classes of notes. The notes benefit from excess spread and subordination. The senior tranches—classes A1 and A2—benefit from 20% and 10% credit enhancement, respectively. The class M certificates benefit from 5% enhancement, said Arvind Mohan, Kiavi Funding’s chief operating officer.
In most securitizations, the sponsor retains the bottom 5% of the notes, in keeping with risk retention rules that have been in place since 2014, and the
requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. For this particular deal, Kiavi sold 95% of the bottom residual class to an institutional investor, according to the company statement.
“We held a vertical risk retention [slice] for risk retention purposes,” said, noting that the piece represents 5% of all bonds, and 5% of the residual portion.
All of the underlying assets are fixed-rate, while the notes are benchmarked to interpolated two- and three-year swaps.
Proceeds from the transaction will support about $750 million in new loan originations amid the thriving industry of revitalizing aged homes. For its part, San Francisco-based Kiavi Funding uses its data-driven digital platform to provide financing to real estate investors.
The transaction is the sponsor’s eighth broadly syndicated securitization transaction since it began its revolver securitization program in 2019.
