US Bank Completes Fifth Securitization of Refinanced Student Loans

By Guglielmo de Stefano on Monday 29 February 2016

Alternative Lending

Darien Rowayton Bank closes $188 million securitization of refinanced student loans.


Connecticut-based Darien Rowayton Bank (DRB) - a national US bank and marketplace lender – has announced the closure of a $188 million securitization of refinanced student loans. This fifth securitization round brings its total issuance to in excess of $1.1bn.


Established in 2006, DRB aims to help thousands of professionals with graduate and undergraduate degrees across the US to refinance and consolidate federal and private student loans, saving these borrowers thousands of dollars each. The company claims to be the fastest lender in industry history to reach $1bn in student loan refinancing.


The senior notes of the $188 million securitization were rated A2 to A3 by Moody's and AA by DBRS - a full-service rating agency that provides credit ratings on issuers of commercial paper, bonds, long/short term debt, and preferred shares. The loan portfolio is comprised of 75% fixed and 25% variable loans.


Aryea Aranoff, Chief Strategy Officer at DRB, commented:


"Since DRB began focusing on student loan refinancing, we have prided ourselves on providing our borrowers with the lowest interest rates, the best customer service and leading technology that would allow them to focus on establishing a strong financial future. Our fifth securitization enables us to continue offering this to our borrowers. In less than two years, we have seen vast growth, and we continue to expand our product offerings as we focus on developing long-term relationships with our borrowers nationwide."


In December 2015, DRB closed a $333 million transaction, a deal rated A2 to A3 by Moody's and AA by DBRS – again comprised of 75% fixed and 25% variable loans. Additionally, in November 2015, DRB closed a $359 million transaction, a deal rated BBB+ by Fitch Ratings and A by DBRS comprised of 69% fixed and 31% variable loans.


This deal is clear evidence of two different trends in the industry.


Firstly, traditional financial services firms and banks are wising up to the scale of the alternative finance space worldwide (£3.2 billion in cumulative lending in the UK alone last year) and are becoming more involved. Perhaps the most prominent example in recent times is offered by J. P. Morgan Chase, which entered into the world of online lending by inking a deal with OnDeck last December.


The second trend pertains to the increasing popularity of refinanced student loans. The key leader in this alternative finance sub-sector is the San Francisco-based marketplace lender SoFi. The platform passed the $6 billion mark in cumulative lending last December – a total comprised of mortgages, personal loans, and student loan refinancing - and closed a $1 billion Series E investment round last October, at a valuation of $4bn. It’s becoming an increasingly crowded niche, and one that’s ripe for securitisation.


DRB has been providing refinancing options for student loans since 2013 and has originated over $1.4 billion since launching its student loan division. We’ll continue to keep an eye out for this to date rather under-the-radar lender.

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