Kiavi Funding launches $271 million in residential transition loans

Kiavi Funding sponsored the LHOME 2022-RTL 1 deal, issuing $271 million in revolving securitization notes secured by unrated residential bridging loans. The transaction is the first transaction in which Kiavi has sold its remaining stake.

The transaction also represents Kiavi’s first deconsolidated transaction, given the sale of the residual interest. Barclays Capital acted as sole structuring agent, according to a company statement. Nomura Securities and Performance Trust Capital Partners have joined Barclays as joint bookrunners and joint lead managers.

The Notes will be issued through a capital structure consisting of three classes of Notes. The Notes benefit from Excess Spread and Subordination. The senior tranches, classes A1 and A2, benefit respectively from a credit enhancement of 20% and 10%. Class M certificates have a 5% bonus, said Arvind Mohan, chief operating officer of Kiavi Funding.

In most securitisations, the sponsor retains the bottom 5% of the notes, in accordance with the risk retention rules in force since 2014, and the

requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. For this particular transaction, Kiavi sold 95% of the residual lower class to an institutional investor, according to the company’s statement.

“We held vertical risk retention [slice] for risk retention purposes,” said, noting that the coin represents 5% of all bonds and 5% of the residual portion.

All underlying assets are fixed rate, while the notes are indexed to two- and three-year interpolated swaps.

Proceeds from the transaction will support approximately $750 million in new lending to the burgeoning senior home revitalization sector. For its part, Kiavi Funding, based in San Francisco, uses its data-driven digital platform to provide financing to real estate investors.

The transaction is the sponsor’s eighth largely syndicated securitization transaction since the start of its revolver securitization program in 2019.

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