SoFi sold $313.8 million of securities backed by private student loans.
The class A1, floating rate notes, rated singleA by both Moody’s Investors Service and Standard & Poor’s priced at 120 basis points over one month Libor. DBRS assigned the notes a AA’ rating. The class A2, floating rate notes, rated at the same level as the class A1 notes, priced at swaps plus 125 basis points. The notes have a weighted average life of 2.3 years, a shorter term relative to typical private student loan transactions, which tend to have a WAL of four to eight years. Moody’s stated in the presale report that the shorter term means the notes have less risk of exposure to multiple economic downturns.
By comparison, the class A notes SoFi sold in November have a WAL of 3.30 years. The floating-rate portion priced at a spread of 125 basis points over one-month Libor and the fixed rate notes priced at swaps plus 130 basis points. The notes were rated similarly to the issuer’s last transaction.
This is SoFi’s fourth transaction since debuting in
The underlying collateral consists mostly of loans that refinanced existing federal student loans to borrowers who completed graduate studies at top-tier universities.
The credit quality of the 2015-A loan pool is very strong and in line with previous SoFi deals. Borrowers have a weighted average credit score of 776, weighted-average annual incomes of approximately $142,000 and weighted-average monthly free cash flow of approximately $5,900.
Although the loans do not benefit from a guarantee from the U.S. government, risk of default is mitigated by borrowers' strong payment history. Borrowers in the pool have made on average 33 student loan payments before refinancing into SoFi loans.
The borrowers are also much older relative to other private student loan pools. According to Moody’s presale, borrowers are on average 32, compared with average ages in the 20s for the typical private student loan borrower. What is more, almost all of SoFi 2015-A’s borrowers are employed and the borrowers are more established in their careers than are typical PSL borrowers.
Still, the relatively short operating history of SoFi — the firm originated its first refinancing loan in 2012 — means there is little historical data to base delinquencies or prepayment losses on. What is more, the loans are mostly not co-signed from borrowers who are still early career professionals. S&P stated in the presale that these factors “weigh against" assigning a rating above single-A to the SoFi transaction.
However, Moody’s stated in the presale that although “loans originated through SoFi’s platform have not been through a recession ... SoFi’s borrowers are concentrated in the medical, business and legal fields in major metropolitan areas and therefore will be affected by more industry specific economic cycles”. To date, SoFi’s refinancing loans have performed well, with only a handful of delinquencies and no defaults.
As of December 31, 2014, SoFi had originated over $1.5 billion in loans to over 19,000 different borrowers.
