Kentucky Higher Education Student Loan Corp. is planning a $563 million securitization of federally-guaranteed student loans, according to a presale report from Standard and Poor's.
The deal is being underwritten by Bank of America Merrill Lynch and is expected to close Aug. 27.
The Series 2013-2 transaction features a single, senior tranche of notes assigned preliminary 'AA' ratings from S&P.
The notes are backed by pool of FFELP loans to 50,469 borrowers with an average outstanding balance of $11,182. It comprises roughly 50.8% Stafford Direct, 46.7% Consolidation, and 2.5% Parent Loan for Undergraduate Students (PLUS) loans. About 47% of the pool is 97% government guaranteed, and the remaining 53% is at least 98% guaranteed.
S&P describes the loans as 'well-seasoned'; but notes that only 74% of the pool is in repayment status and generating cash flow. The remainder of the borrowers are either in school or in grace (1.1%), deferment (12.7%), or forbearance (11.9%) status. (Students do not need to begin paying off government sponsored loans until six months after graduating, and can defer if they attend graduate school or otherwise remain in school.)
Additionally, 6% of the pool is rehab loans. Rehab loans are FFELP loans that previously defaulted and have subsequently been "rehabilitated" according to the Higher Education Act's guidelines.
Kentucky Higher Education Student Loan Corp will service the notes itself, with Nelnet Servicing acting as backup servicer.