A pool of refinanced prime private student loans will secure $281 million in asset-backed securities from the ELFI Graduate Loan Program 2023-A through three classes of notes.
Bank of America Merrill Lynch and Citigroup Global Markets are managers on the transaction, which the deal, according to ratings analysts at S&P Global Markets. The agency finds that the notes have 10.0%-10.5% in credit support, based on its 'AAA' stress break-even cash flow scenarios.
ELFI Graduate's pool characteristics include a weighted average borrower FICO score of 763, and a weighted average (WA) borrower income of $129,895. Advanced degree holders account for some 38.74% of the loan pool, a group that has experienced lower unemployment levels than undergraduate degree holders during prior economic downturns.
Should the transaction's cumulative default rate—as a percentage ELFI Graduate Loan Program's initial pool balance—exceed 2.45% on or before Oct. 25, 2027, a lockout trigger accelerates note principal repayments from closing until May 25, 2024.
The pool has strong credit quality, which confers a moderately low level of expected servicing intensity, S&P said. In fact servicers Higher Education Loan Authority of the State of Missouri (MOHELA) and the Pennsylvania Higher Education Assistance Agency, strengthen the deal's overall credit outlook.
The class A notes, which account for 91.03% of the total issuance amount, will be fixed-rate notes, while classes B and C will be non-interest bearing notes. The regular principal distribution amount on the class A amount is designed to build and maintain an overcollateralization amount of 13.60% of the adjusted class A pool balance, S&P said. After that, a target maintained OC on the classes B and C notes were designed to build to 11.90% and 4.79%, respectively.
The rating agency intends to assign 'AAA' to the class A notes, but the other two are not rated.
