A pool of higher education loans, a vast majority of which were either refinanced or extended to students with greater needs for financing, is securing the Iowa Student Loan Liquidity Corp., series 2022A and 2022B, and will raise $155.7 million from the capital markets.
The trust will issue both taxable and tax-exempt bonds through the 2022A and 2022B series, respectively, according to S&P Global Ratings, which expects to assign ratings.
Bonds will be issued through a senior-subordinate structure. The senior and subordinate bond parities are expected to be 139.4% and 123.7%, respectively, S&P said.
The revenue bonds will benefit from a reserve account that equals 2.0% of the initial bond balance at closing, and the issuing entity, Iowa Student Loan Liquidity Corp., must maintain the reserve account at 2.0% of the current bond balance, according to S&P.
RBC Capital Markets is the deal’s underwriter, which will restrict releases prior to June 1, 2023. After that date, releases are allowed, as long as:
- parity is at a minimum of 120.0%
- accrued assets exceed accrued liabilities by at least 1.2 million and
- the current bond balance is no less than 10% of the initial aggregate bond balance as of closing
S&P says that under a moderate stress scenario, or ‘BBB’ stress scenario, it expects the ratings to remain within one category of its preliminary ‘AA’ rating in the first year.
Reset refinance loans account for 54.8% of the pool, while Partnership Advance Education Loan Program accounts for 27.3%, totaling 82.1% of the pool. Other portions of the pool include prior private loan programs and 8.1%, and reset refi medical residency, at 9.8%, according to the rating agency.
Most of the loans, 66.1%, have a cosigner. The loans in the collateral pool are in varying repayment status, with repayment being the largest, at 67.0%, followed by deferment, at 16.2%, and residency, at 9.7%, S&P said.
S&P expects to assign ‘AA’ ratings to all of the classes of notes, whose expected maturity dates range from Dec. 1, 2023 to Dec. 1, 2032.
