In a sign of the interest among U.S. professionals in refinancing their federal student loan debt, start-up lender Social Finance is planning its first loan securitization.
The approximately $170 million deal is expected to be distributed in early December. It will include about $150 million in senior notes and $20 million in equity, according to the San Francisco-based company.
SoFi, as the firm is known, is a two-year-old nonbank lender whose borrowers are either enrolled in, or have graduated, from business, law, medical and other professional schools.
Under the federal student loan program, such students often have to borrow at relatively high interest rates, so refinancing into a private student loan can be an attractive option. Startups, including SoFi and competitor CommonBond, Inc., which launched in 2012, have rushed in recent years to fill this niche.
SoFi is touting its upcoming securitization as the first rated securitization by a peer-to-peer lender. The company calls itself a peer-to-peer lender because some of its funding has come from alumni of the universities its borrowers attend.
But like a number of other firms that use the peer-to-peer moniker, SoFi has also raised money from large investors, including Morgan Stanley (MS), the Bancorp Bank (TBBK), and East West Bank (EWBC).
The securitization deal is being structured by Barclays and distributed by Morgan Stanley, according to SoFi.
SoFi expects the securitization to receive a single-A rating from the ratings agency DBRS. A DBRS spokesman said the ratings agency does not discuss potential deals.
Since SoFi was launched, the company has lent out roughly $200 million to 2,500 borrowers, according to its website.