Educational Services of America is marketing $411 million of student loan backed securities, according to a presale report published by Moody’s Investors Service.

Morgan Stanley and BMO Capital Markets are the lead underwriters.

All of the student loans being securitized were made under the Federal Family Education Loan Program and are reinsured by the U.S. Department of Education for at least 97% of defaulted principal and accrued interest. Sixty-three percent of the loans are consolidated loans and 25% have been “rehabilitated,” meaning that the borrower has previously defaulted, the lender submitted a claim to the guarantor, but the borrower has subsequently made at least nine on-time payments to the guarantor.

Moody’s expects rehabilitated FFELP loan pools to experience a higher net loss rate compared with pools of non-rehabilitated FFELP loans; nevertheless, it expects net losses on the pool to be approximately 0.71%.

In Edsouth’s previous student loan securitization, which was completed in 2013, just 36.3% of the loans were consolidated but 100% were rehabilitated.

The trust will issue $400.1 million of floating-rate class A notes due in 2039 with preliminary ‘Aaa’ ratings from Moody’s and $10.9 million of floating-rate class B notes due in 2045 with preliminary ‘Aa1’ ratings.

Edsouth was established in 1994 as a Tennessee nonprofit and was designated by the Federal Reserve Bank as a bank holding company in 2009.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.