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Oxford Finance readies 1st life sciences loan ABS in over 2 years

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Oxford Finance, a lender that specializes in venture capital-backed life sciences and health care firms, is marketing a $312.7 million revolving securitization.

Oxford Finance Funding 2019-1 LLC is the fifth term securitization of assets managed by the firm, and the first since May 2016. Four tranches of notes will be issued in the transaction, including two senior tranches, a floating-rate $40 million Class A-1 tranche and a $235.07 million fixed-rate Class A-2 notes tranche. The A-1 notes and A-2 notes will receive payments streams from the corresponding variable- and set-rate loans underwritten by Alexandria, Va.-based Oxford.

Kroll Bond Rating Agency has assigned a preliminary single-A rating to the senior notes, as well as a BBB to the $37.68 million fixed-rate Class B tranche. The Class A and B notes benefit from advance rates (73% and 83% respectively) that serve as overcollateralization; the OC levels decrease as payments reduce the number of obligors.

The deal features a 24-month reinvestment period, in which principal collections can be used to invest and acquire additional loans for the pool. One of the restrictions in the pool is ineligibility of second-lien loans that lack a pledge or lien on assets. Kroll notes other venture-capital-backed ABS transactions “typically” allow up to a 15% limit on second liens.

The pool consists of 50 loans to 46 obligors with a combined outstanding loan balance of $376.8 million. Oxford is retaining some of the loan assets as equity, according to Kroll. The transaction includes a two-year revolving period.

Nearly 90% of the loans were made to life sciences loans. Most of the loans are collateralized with a lien on a firm’s entire assets, including intellectual property rights.

The IP rights serve as the primary collateral for the life sciences loans in the biotech, pharmaceutical and medical device field. Those corporations pledge the secured IP rights for assets under development and research; the loan-to-value ratios for the life sciences loans are kept at a low 23.6%, allowing the loans to be repaid more easily for alternative exit strategies from VC control.

Health care services firm loans are supported by collections from cash flow and accounts receivables.

The firm is 75% owned by private equity/VC firm Wafra Capital Partners in New York. At the time of its previous securitization, Oxford was controlled by management with a large minority stake belonging to Sumitomo Corp.

Since 1987, Oxford has originated $5 billion in loans to 500 companies, and experienced net charge-offs totaling $43.2 million, or a rate of 0.87%. As of Sept. 30, it had $1.7 billion of investments outstanding.

In addition to senior-secured term loans, Oxford offers cash-flow loans, revolving lines of credit and equipment loans.

Barclays is the sold structuring advisor and bookrunner, as well as the lender on the variable funding notes, according to Kroll.

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Esoteric ABS