The Massachusetts Educational Financing Authority (MEFA) is preparing the $394.7 million issue M, series 2022, education loan revenue bonds, which will provide liquidity to private student loans and refinanced loans.
MEFA series 2022—the second issue from the Issue M resolution—will issue notes that have about 10.4% on its ‘AA’-rated and ‘BBB’-rated 6.1% in credit support, including excess spread, on its break-even cash flow scenarios, respectively. Those credit support levels provide coverage multiples of about 5.8x for the senior bonds and 3.4x on the subordinate bonds, according to a pre-sale report form S&P Global Ratings.
RBC Capital Markets and BofA Securities are underwriters on the transaction, which is slated to close on June 23. At closing the series will be comprised of about $278.1 million in federally taxable bonds, $88.1 million will be senior 2022B AMT bonds, and $28.5 million in subordinate 2022C AMT bonds. All of the bonds are fixed rate.
With the proceeds, MEFA expects to originate some $271.5 million of new loans during the origination period ending on Sept. 30, 2023, and can use excess revenues to originate additional loans during the recycling period ending Dec. 31, 2023.
Among other features, the MEFA series 2022 will issue serial and term bonds, according to S&P. Most of the transaction is comprised of senior serial bonds.
The $134.7 million, 2022A notes and the $35.7 million, 2022B senior term bonds, both rated ‘AA,’ will be subject to mandatory sinking fund redemptions, according to the presale report. In such an arrangement, a dedicated fund will accumulate proceeds specifically to buy back the issued bonds before the transaction’s maturity dates. On the current transaction, those maturity dates are July 1, 2038.
Most of the transaction is slated to garner a ‘AA’ rating, while the $28.5 million, subordinate 2022C bonds, rated ‘BBB’.
