Another private student loan transaction this week is making its way to the securitization market, as Navient Refinance Loan Trust, series 2025-A sells $550 million to investors.
The collateral pool is composed exclusively of loans that refinance federal and private student debt, and the first from sponsor Navient Refinance Solutions, according to Moody's Ratings.
NAVI 2025-A will sell the notes through three tranches of classes A, B and C notes, all of which have a Feb. 16, 2055 legal final maturity date. The A, B and C notes benefit from total initial hard credit enhancements equaling 8.80%, 4.80% and 0.26%, respectively.
All the notes also benefit from a reserve fund equaling 0.25% of the note balances, Moody's said.
J.P. Morgan Securities, ATLAS SP Securities, Barclays Capital, BofA Securities and RBC Capital Markets, are initial purchasers on the deal.
Earnest Operations originated all the collateral securing the NAVI 2025-A notes before December 2020, around the time that Navient started to align the guidelines of the NaviRefi loan program with those of the Earnest loans, according to Moody's Ratings. Refinance borrowers are generally less likely to default than borrowers who are either in school, or recently graduated and have started repayment.
Earnest Operations an Higher Education Loan Authority of the State of Missouri are subservicers, the rating agency said.
Notes will repay investors sequentially, with credit enhancement for the class A notes growing over time, because NAVI 2025-A uses cash flow to turbo the notes until the overcollateralization amount reaches a specified amount, either $8.2 million or 4.0% of the pool's outstanding balance, whichever is greater.
At the time Earnest originated the loans, the borrowers had a credit score of 749, annual income of $137,807 and monthly free cash flow of $4,626 on a weighted average (WA) basis.
Moody's says it expects the pool to have a WA life of about 3.4 years, based on their high incomes and abundance of monthly free cash flow. These factors will give the transaction less risk exposure to economic downturns, the rating agency said.
Moody's assigned Aaa to the class A notes.
