Lender Seeks to Sell Bonds Linked to U.K. Student Debt

A New York investment firm is seeking to become one of the first private lenders to sell bonds linked to European student loans.

A company backed by Phoenix ABS plans to have its debut offering of asset-backed securities linked primarily to U.K. education debt as soon as next year, according to Amit Sinha, a partner at Phoenix. Sinha, who declined to name the lender or divulge how much in originations has been completed to date, said the firm could have “several billion” in assets within the next five years.

The lender is eyeing the asset-backed bond market as issuance of securities tied to unusual collateral rises in response to central banks around the world suppressing interest rates, driving investors into riskier deals with higher yields. Phoenix is aiming to capitalize on a financing void as the U.K. pushes students to bear a greater share of college costs. Annual tuition, which used to be free, has risen to as much as 9,000 pounds ($14,707) over the past several years, Sinha said.

“There is an opportunity for this to become a relevant asset class for investors soon,” Sinha said during a panel at Information Management Network’s annual ABS East conference in Miami yesterday.

Sales of esoteric asset-backed securities, which encompass transactions that aren’t tied to traditional consumer lending, reached a record $30 billion in the U.S. in 2013, according to Barclays Plc. Issuance of such bonds, which can be backed by anything from music royalties to franchise fees, is on pace to surpass that amount this year, Eric Shea, an executive director at Mitsubishi UFJ Securities USA Inc., said during the same panel.

Hooter’s Bonds

Hooters of America LLC, the chain known for the skimpy tank tops worn by its waitresses, sold $300 million of bonds tied to income from 412 restaurants across the globe in the Atlanta-based company’s first such deal in July, according to data compiled by Bloomberg.

An asset-backed transaction tied to European education loans, primarily from the U.K., would be the first such deal in Europe since 2006 when issuance totaled 8.4 billion euros ($10.8 billion), according to JPMorgan Chase & Co. The last issue of the debt was priced in November of that year and was backed by a portfolio of loans originated by the U.K.’s Student Loans Company.

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