SoFi plans to issue $313.8 million of securities backed by private student loans.
This is the issuer’s fourth transaction since debuting in December 2013. Moody’s Investor Service rated the deal called SoFi Professional Loan Program 2015-A. Morgan Stanley, Goldman Sachs, Barclays, Credit Suisse and Deutsche Bank are the underwriters.
Moody’s plans to assign A2’ to the class A-1 and class A-2, floating and fixed rate notes. 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.
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 frm originated its first refinancing loan in 2012 — means there is little historical data to base delinquencies or prepayment losses on. 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.