With its first public term securitization under its belt, College Loan Corp. aims to issue student loan ABS two to four times a year going forward, sources said. The new player in the student loan sector also plans an expansion into Europe, via longer-dated tranches in future offerings.
The recent $1.3 billion 2003-2 transaction is the lender's largest to date, but not its first. The San Diego-based company has privately placed three previous securitizations of undisclosed size, via its selling group of Citigroup Global Markets, Goldman Sachs and UBS. The most recent offering, led jointly by Citigroup and UBS, priced on Oct. 3.
The sailing was not entirely smooth for the offering, however, as a $1.3 billion three-year tranche was restructured into separate $646 million three-year A2 and $308 million five-year A3 classes prior to pricing. Additionally, the three-year A2 class priced at 14 basis points over three-month Libor, six outside of price guidance. Bankers familiar with the situation cited a lack of investor familiarity of the issuer for the widening.
The spread pickup could prove to be a bargain for buyers, as credit risk of servicer is limited. College Loan Corp. does not service its student loans, instead contracting the rights out primarily to ACS Education Services, formerly AFSA. Of the loans in the 2003-2 transaction, 86.6% are serviced by ACS with the remainder serviced by The Great Lakes Higher Education Loan Services Inc., Pennsylvania Higher Education Assistance Authority and Nelnet, itself a familiar name in the student loan sector. Aside from the 86.6% serviced by ACS, none of the third-party servicers account for more than 5% of the total.
The lender's total pool balance, according to a Fitch Ratings presale report, sits at $3.8 billion as of July 31. Average loan size is $23,544 with a 4.58% rate. Seasoning on the 2003-2 pool is 11 months, with 74.2% in repayment. While the collateral in this offering is highly concentrated in consolidation loan collateral (95.5%), the firm is planning to grow its federally insured Stafford and PLUS loan business. While this pool does not contain any private student loans, CLC does offer private alternative loans.
CLC's management team has a lengthy background in the student loan sector, with executives having worked at lenders and investment banks. Paul Marble, CLC's CFO, joined CLC from Nellie Mae as a consultant upon the firm's inception in 2000, taking his current position in late 2001. Senior Vice President Mark Brenner is a former banker, coming to CLC in 2002 from student loan specialists W.R. Hough. Joe Katey, who maintains the firm's relationships with its institutions, is a former PNC Bank banker.