Social Finance is returning to the securitization market with $626.4 million of bonds backed by loans used to refinance the student debt of borrowers with advanced degrees and high incomes.
The transaction, SoFi Professional Loan Program 2017-E, comes just weeks after the marketplace lender experienced a management shakeup; its chief executive officer and chief financial officer both resigned. Chairman Tom Hutton is acting as interim CEO and another board member, Steven Freiberg, is acting as interim CFO.
This is not SoFi’s first public offering since the shakeup however; SoFI was in the market last month with an offering of bonds backed by unsecured consumer loans. Both DBRS and S&P Global Ratings noted the management changes in their presale report on the student loan deal, but did not comment on them.
It's the first time S&P has rated a SoFi student loan securitization since 2015, and the rating agency has lifted its rating cap on the senior tranche after analyzing the additional performance history of SoFi's loans.
The credit quality of the collateral is similar to that of SoFI’s previous student loan securitization, according to rating agency presale reports. The weighted average FICO of the borrowers increased slightly, to 763 from 759; the weighted average income also increased to $172,971 from $158,084. The average loan balance increased to $71,056 from $65,103, and the percentage of the obligors without advanced degrees in the pool decreased to 27% from 33%.
However, there have been some changes in the structure of the deal. The initial total overcollateralization – the amount of collateral that exceeds the balance of the notes – decreased, to 4.25% from 6.16%. However, the overcollateralization of the senior, Class A notes has been increased, to 17.92% from 12.96%.
Another change is that the deal may have some exposure to counties that were declared a major disaster area due to Hurricanes Harvey and Irma. (The loans were bundled together before Aug. 7.) These loans will be repurchased from the securitization trust prior to closing, and the proceeds will be used to acquire additional collateral.
As with prior deals, the variable-rate Class A-1 notes will be primarily secured by a group of variable-rate loans. The fixed-rate Class A-2A notes and Class A-2B notes will be primarily secured by a group of fixed-rate loans. The Class B notes and Class C Notes will be secured by both the variable-rate and fixed-rate loans.
DRBS and Standard & Poor’s Global Ratings both expect to assign triple A ratings to the senior notes.
The Higher Education Loan Authority of the State of Missouri is the servicer.
