Navient bypasses floating-rate collateral in new $609M student-loan refi ABS

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Navient Corp. is returning to all fixed-rate collateral for its next securitization of refinanced private student loans issued to high-earning college graduate professionals.

The $609.7 million Navient Private Education Refi Loan Trust 2019-C excludes floating-rate loans that were included in Navient’s previous asset-backed deal (Navient 2019-A) featuring originations by its Earnest Operations affiliate.

The collateral pool consists of 9,552 loans with average rates of 5.56% and remaining terms of 151 months. Borrowers average 32 of age, and are higher-earning professionals with an average annual income of $123,720. More than 56% of the collateral loan balance is tied to loan accounts of advanced-degree grads who have monthly free cash flow of $3,729.

The $635.07 million of loans in the pool have an average account remaining balance of $66,486, which is the lowest of four previous Navient refi loan securitizations since the Sallie Mae Inc. spinoff acquired Earnest in 2017.

They are not guaranteed or reinsured under the Federal Family Education Loan Program (FFELP) or other federal student-loan program. All the loans were originated via Earnest.

The transaction will feature $562 million in notes across two Class A tranches, each with preliminary AAA ratings from DBRS and S&P Global Ratings. A $47.63 million Class B notes tranche is rated AA by DBRS, but unrated by S&P.

The notes have lower subordination (7.81%) and overcollateralization (11.4%) levels compared to Navient’s previous deal (9.57% and 14%, respectively).

S&P’s 3.25% expected loss rate on the transaction is unchanged from Navient 2019-A.

The deal is expected to close May 16, and is underwritten by Merrill Lynch, Pierce, Fenner & Smith, Barclays Capital and RBC Capital Markets.

Navient has issued four securitizations in 2019, including pools of federally insured and guaranteed FFELP loans it services as well as seasoned private loans originated under the former Sallie Mae Inc.

Navient plans to launch private lending products for undergrads and their families in the third quarter this year, following the expiration of its former noncompete agreement with the successor Sallie Mae Corp.

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