Frequent student loan ABS issuer Navient is returning to the securitization market to raise $510.5 million in notes secured by private refinancings of student loans to highly qualified borrowers, and on shorter terms than other private student loan deals.
Navient Solutions is sponsoring the transaction, and will be the administrator on the deal, as well, according to Fitch Ratings, which intends to assign ratings to the fixed-rate notes. Earnest operations will service the transaction's two classes notes.
NaviRefi loans account for 30% of the collateral securing the Navient Private Education Refi Loan Trust, 2023-A's. It is a noticeably higher concentration of the product than the previous deal, the 2022-B, which contained a 21% concentration of the loans, according to Fitch Ratings. As for the rest of the collateral composition, some 79% of NAVI 2023-A's other underlying loans are from the Earnest program, according to Fitch.
The rating agency noted several strengths about the transaction, including the collateral's high quality. The loans have a weighted average (WA) credit score of 746, verified annual income of $125,214 and monthly free cash flow of $4,396.
In another credit positive, the underlying loans have a WA remaining term of 153 months, compared with WA remaining terms of 160 to 190 months on other similar deals, according to the rating agency.
Although NAVI 2023-A will issue notes through just two classes, the structure is sequential, Fitch said. Other forms of credit enhancement include excess spread, which will turbo the notes until the overcollateralization (OC) amount reaches the specified OC amount. This is the greater of 13.00% of the outstanding pool balance and $8.6 million.
The high quality of the loans notwithstanding, the collateral pool borrowers are concentrated in the medical, business and legal fields in major metropolitan areas. Such a concentration would be more sensitive to industry-specific economic cycles.
Fitch expects to assign ratings of 'Aaa' to the $480.3 million, class A notes.
