Social Finance (SoFi) sold $303.2 million of bonds backed by its private student loans to strong investor demand, according to a person familiar with the deal.
SoFi Professional Loan Program 2014-B issued two tranches. The floating-rate portion, rated single-A by Moody’s Investor Service and Standard & Poor’s, priced at a spread of 125 basis points over one-month Libor. The note were structured with a weighted average life of 3.89-years.
The 3.30-year, single-A rated floating-rate notes priced at swaps plus 130 basis points. DBRS rated the bonds AA’.
This is SoFi’s first private student loans securitization to secure ratings by three ratings agency.
SoFi is a nonbank lender whose borrowers are either enrolled in, or have graduated, from business, law, medical and other professional schools. While it started as a peer-to-peer company, acting as an intermediary between alumni lenders and the borrowers, SoFi is now primarily funded by institutional investors.
SoFi originated all of the loans in the 2014-B pool; 99.5% are refinancing loans, primarily to borrowers who were out of graduation school and had outstanding loans.
Borrowers refinancing with SoFi have been making principal and interest payments for some time and are less likely to default than student loans that are just entering repayment.
The borrowers in SoFi 2014-B have made a weighted average of 23 student loan payments before refinancing into SoFi loans. The remaining 0.5% of the loan pool in SoFi 2014-B consists of in-school loans, which borrowers use to finance the costs of attending approved educational institutions.
The collateral in SoFi's deals stack up better than other private student loans. For example almost all of SoFi 2014-B’s borrowers are employed and the borrowers are more established in their careers than typical borrowers of private student loans.
The SoFi 2014-B loan pool has a weighted-average remaining term of 115 months, compared with terms of 180 to 300 months for most other private student loan pools. SoFi’s refinancing loans enter repayment immediately after origination therefore the loans amortize from the beginning of the transaction. In contrast, other PSL deals contain in-school loans that borrowers may defer for several years.
The weighted average credit score for borrowers of SoFi 2014-B is 779, compared with 776 for SoFi 2014-A. In a typical recent PSL transaction the weighted-average FICO is above 730.