Kentucky Higher Education Student Loan Corp is preparing to issue $95.3 million in student loan revenue bonds, supported by a pool of 12,542 undergraduate and refinance higher education loans originated through the Advantage Loan Program.
The series 2025A-1 and 2025A-2 will both issue fixed rate notes, which have maturity dates ranging from June 1, 2028 through June 1, 2040.
BofA Securities is the deal's lead underwriter.
All the notes have credit enhancement totaling 28.3% of the pool balance, which it gets through overcollateralization, subordination and excess spread, rating agencies said. Also, when the deal closes a reserve fund totaling $6.3 million will provide liquidity support.
Fitch noted that it assigned a weighted average (WA) portfolio default rate of 7.1% as of closing. For its part, S&P expects an overall cumulative default rate that ranges between 8.0%-9.0%, both for the loans that will be added to the deal at closing, and the loans that will be purchased for the deal with the bond proceeds.
S&P based its default expectation on several ideas, specifically that loans to obligors who start repayments in school will outperform loans to obligors who do not. Another is that obligors with a cosigner will outperform those without one, and obligors with higher FICO scores will outperform loans to those with lower FICO scores.
In the current transaction, loans with a cosigner account for 78.6% of the principal balance, while non-cosigned loans represent 21.3% of the principal balance.
A large majority of the loans, 70.6%, are expected to be in the repayment phase, while 20.5% are held by borrowers still in school, according to the firms S&P Global Ratings and Fitch Ratings.
Fitch assigned 'A' ratings to all the notes in the 2025A-1 and 2025A-2, and S&P also assigned 'A' throughout the 2025A-1 and 2025A-2.
