Bloomberg First Word by Adam Tempkin (June 15, 2016)
SoFi’s first rated securitization of unsecured consumer loans, the $379.8m SCLP 2016-1, has a top rating of Single-A, 25% CE, and is backed by collateral with a larger percentage of longer-term loans vs its marketplace lending peers, Kroll writes in a presale report.* Transaction has ~56.3% of the underlying loans that have 84-month loan term, and WA loan term is ~70 mos.
- Peers in the prime loan space generally have WA loanterm between 44 to 48 mos.
- However, SoFi generally makes longer loans to morecredit-worthy obligors vs its peers, and the longer termallows for manageable payment sizes
- Another concern: limited asset performance data
- SoFi has ~13 mos. of performance data on loan terms thatmay be as long as 84 mos.
- Given this limited data, KBRA supplemented itsanalysis with proxy data from other online consumermarketplace lenders to determine Cumulative Gross Loss (CGL) assumptions for SCLP 2016-1
- Headline risk in marketplace lending sector is another concern
- However, SoFi has several positive factors distinguishing it from its peers, including fact that itonly originates loans to high quality borrowers, whose credit scores are comparable to the top credit grades of other marketplace lenders
- Basis risk is another factor; notes in transaction exposed to basis risk given that ~14% of underlying loans pay interest at a variable rate tied to Libor plus a spread, while the interest rates on the notes are fixed
- Target OC is 31%
- Credit score distribution: Largest percentage of borrowers have FICO 700 – 719