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SoFi extracts additional funding in latest consumer loan ABS

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Social Finance took advantage of strong demand to extract additional funding from its latest consumer loan securitization this week.

The $650 million transaction, SoFi Consumer Loan Program 2017-6, is the largest of SoFi’s consumer loan deals to date. Four tranches of rated notes totaling $591 million were issued, resulting in an advance rate of 92%. By comparison, only two tranches of rated notes, one senior and one subordinate, were issued in the prior deal, which priced in September, just as former CEO Mike Cagney resigned. That resulted in an advance rate of 88%.

Two senior tranches of notes rated double-A by S&P Global, DBRS and Kroll Bond Rating Agency were issued. The $315 million Class A1 tranche was priced to yield 57 basis points over the eurodollar synthetic forward curve, in from a spread of 65 basis points on the comparable tranche of the previous transaction.

The $175 million Class A2 tranche was priced to yield 90 basis points over the interpolated swaps curve, in 15 basis points from a spread of 105 basis points on the same tranche of the previous deal.

The $75 million Class B tranche, which was rated single A, priced at 150 basis points over swaps, compared with a spread of 185 basis points on the same tranche of the prior deal.

The $26 million Class C tranche, which was rated BBB, priced at 200 basis points over swaps. It was the first time this year that SoFi has included a Class C tranche in a consumer loan securitization. It was able to place these notes with 10 investors.

In all, the deal had 39 unique investors, which ties for the most on any SoFi securitization, said Ashish Jain, senior vice president, capital markets. There were five new investors and $2.2 billion of orders, which is a record for the company’s consumer loan ABS.

While SoFi has been tweaking the capital structure of its consumer loan deals to maximize the advance rate, Jain believes in keeping the structure of deals fairly simple. The company is also focused on coming to market regularly, rather than selling the maximum amount in any given transaction.

“We have a very loyal strong following that includes some of the largest investors in the U.S., and also some Asian investors,” Jain said.

Despite the higher deal size, the credit quality is in line with that of previous deals. The weighted average FICO score is 741, the weighted average original term is 66 months, the average loan size is $31,393 and the weighted average borrower rate is 9.66%.

In addition to the loans owned by SoFi, the collateral included loans previously sold to Goldman Sachs and to one other investor.

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