Educational Services of America is marketing $302 million of securities backed entirely by rehabilitated Federal Family Education Loan Program Stafford, PLUS, SLS and consolidation student loans.

BMO Capital Market and Morgan Stanley are the lead underwriters.

Moody's Investors Service and Fitch Ratings have assigned preliminary ratings to the deal, called Edsouth Indenture No. 8 Series 2014-4. The trust willoffer two class of floating-rate notes. The class A notes, due May 2046, will be rated ‘Aaa’/ 'AAA' and the class B notes, due June 2048, will be rated ‘A1’/ 'A'.

Although all of the loans in the pool are reinsured by the US Department of Education for at least 97% of defaulted principal and interest, they have a higher expected rate of default than loans that have never defaulted. The expected net loss on the rehabilitated FFELP loan pool to be securitized is approximately 1.4% compared to non-rehabilitated FFELP loan pools, which typically experience an expected net loss of less than 0.50%, according to Moody’s.

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.