Moody’s Investors Service has a less benign view of Sallie Mae’s split than its peers. 

Last week Sallie Mae said it planned to separate into two different publicly traded entities, one that manages its existing loan portfolio and one that makes new loans.

Moody’s said today that the split is “credit negative” for the Sallie Mae’s student loan securitizations. That’s because the entity that services these deals would be smaller and less diversified than the currently combined company.

Moody’s said the private student loan securitizations are more affected than securitizations of government guaranteed loans.

Standard & Poor’s is not so negative. Last week the rating agency said that it did not expect the split to have any credit impact on Sallie Mae’s student loan-backed securities. Others see some upside: Barclays analysts said in a research note published last week that split could even be somewhat positive for Sallie Mae deals.

Moody’s view is that a smaller servicer would be more “vulnerable to financial distress.” In a research report, the agency said the company’s focus on private student loans “will expose it to potentially volatile credit performance, as was the case during the recession.”  It noted that the consumer banking business would retain only around 5% of the assets that Sallie Mae currently holds.

Another concern, according to Moody’s is that Sallie Mae’sprivate student loan securitizations do not have a named backup servicer.

Moody’s rates approximately $25 billion of Sallie Mae’s private student loan securitizations.

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