The pricing of Nelnet Inc.'s $2.4 billion transaction went exceptionally well last week, say market players. This is understandable. Secured wholly by FFELP loans and carrying triple-A to single-A ratings from the three major credit rating agencies, the deal had a lot in its favor.
Of course, it also helps that Nelnet's largest competitor, Sallie Mae Corp. - which has historically dominated student loan ABS issuance - has no immediate plans to come to the ABS market with a deal of its own. As part of a leveraged buyout offer that Sallie Mae received last month, the student loan provider decided to sit out securitization market activity, and will probably stay on the sidelines for some time, thanks to a fairly robust warehouse facility. Sallie Mae's decision to stay on the sidelines has served to increase investor appetite for FFELP-secured student loan ABS, especially because those bonds perceived by investors to have a government guarantee. Further increasing demand for high-quality investments is the fact that issuance from the mortgage market has slowed significantly.