Deal Scan: HESAA Tests Student Loan Market, First Key Preps RPL RMBS

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New Jersey’s state student loan authority is issuing revenue bonds for the first time since coming under fire last year for its aggressive servicing practices.

The Higher Education Assistance Authority is offering $250 million of bonds, most of which will prefund loans to be issued over the next two years, according to Moody’s Investors Service.

In its presale report, the ratings agency noted that legislation introduced at the state level in the second half of 2016 may blunt some of HESAA's recovery powers. For instance, Senate Bill 2510 would require that HESAA obtains a court order prior to using some of its collection tools; Assembly Bill 2926 would claw back HESAA's ability to revoke professional licenses and certifications for failure to pay back a HESAA loan.  Finally, Senate Bill 2573 would require that HESAA establishes an income-driven repayment option and loan rehabilitation program.  

“Although it is unclear if those bills will eventually become law, we did factor the regulatory uncertainty in our ratings analysis,” the presale report states. It does not elaborate.

Moody’s cumulative net loss expectation on the underlying collateral pool is approximately 1.2%. It expects to assign an Aaa rating to senior tranches with maturities ranging from December 2022 to December 2028.

At closing, approximately $203.7 million will be deposited in an origination account to acquire loans; $70 million of which will must be originated by Feb. 1, 2018, $150 million by July 1, 2018, with the remaining $53.7 million by Oct. 1, 2018. 

RMBS: First Key is returning with its second securitization of reperforming mortgages. Towd Point Mortgage Trust 2017-2 is backed by a pool of 4,946 seasoned, performing and re-performing residential mortgages. All are first liens, and have a weighted average FICO of 664 and a weighted average current LTV of 83.6%. Approximately 78.7% of the loans in the collateral pool have been previously modified. Select Portfolio Servicing, is the servicer for the loans in the pool. FirstKey Mortgage will be the asset manager for the transaction.

CLOs: April’s final deal tally stood at 58 totaling $29.8 billion, including $9.8 billion in new deals and $20 billion in refinancing, according to JPMorgan. For Europe, the month ended with the pricing of nine Euro deals totaling €3 billion. On Monday, Moody’s published a pre-sale report for Napier Park Global Capital’s eighth U.S. CLO that it is ramping up from a warehouse line. The $408.05 million Regatta IX Funding Ltd. includes a five-year reinvestment period, and is underwritten by JPMorgan. 

Fewer speculative-grade defaults: S&P Global Fixed Income Research and Moody’s Investors Service each reported declining default activity in April among speculative-grade companies. S&P’s U.S. trailing 12-month speculative-grade corporate default rate declined to 3.8% in April from 4.1% in March. The dip came with six reported defaults in April, including two from the energy and natural resources sector. Excluding oil and gas, the default rate for S&P junk-rated companies was only 1.8%. S&P still projects the default rate to be 3.9% in December 2017 – down from last December’s rate of 5.1%.

For Moody’s, the U.S. non-financial spec-grade corporate default slipped to a two-year low, “buoyed” by recent refinancing activity and easing strains in commodities. The Moody’s speculative-grade default rate dropped to 4.7% (it’s long-term average) with defaults reported by 10 firms, compared to 15 in March. Moody’s expects the default rate to continue its decline, resulting in a 3% by this time next year.

ABS-15G Filings: Toyota Motor Credit filed and Nissan North America each filed plans for upcoming asset-backed offerings with the Securities and Exchange Commission. Toyota Auto Receivables 2017-B is a follow-up to Toyota’s $1.45 billion transaction in March, which had four classes of notes that priced at or near par (with fixed senior note coupons of between 1.42% and 2.1%, as well as a floating rate tranche of Libor plus 7 basis points). Nissan Master Owner Trust Receivables 2017-A is Nissan North America’s first dealer floorplan inventory securitization for 2017 – and the first since last July’s $1.6 billion NMOTR 2016-A transaction. 

Also Monday, Mercedes-Benz Financial Services Canada Corp. filed for the issuance of asset-backed notes secured by auto leases through the MBARC Credit Canada Inc. 2017-A trust. 

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