The third Navient Student Loan Trust (NAVSL 2021-3) securitization this year is seeking investors, and similar to the transactions priced in April and February the current $978.5 billion deal comprises a class A tranche divided into fixed- and floating-rate portions, and a much smaller class B piece.
The new deal’s $964.6 million class A portion’s split was still to be determined, as was the fixed-rate benchmark, according to DBRS Morningstar. Both the class A tranche’s floating-rate portion, and the $13.9 million class B portion will be priced over one-month Libor.
In an April offering from the same trust, the class A portion was split into a $300 million fixed-rated portion that priced at swaps plus 55 basis points, below the 57-60 guidance, and the $697.3 million floating-rate piece priced at 55 basis points over one-month Libor, also below guidance. The $14.3 million class B tranche carries a weighted average life (WAL) of 12.76 years, more than double the WAL of the class A pieces.
Navient Solutions opted to price the floating-rate notes over the Libor reference rate, which will no longer be available for new floating rate transactions at the start of next year. The notes must convert away from Libor to an alternative rate by June 2023.
To increase the likelihood each class of notes will be paid off, the excess funds will be used to turbo principal to the notes, rather than being released from the trust.
DBRS notes that the collateral securing NAVSL 2021-3 comprises student loans originated pursuant to the Federal Family Education Program (FFELP), guaranteed by the Department of Education for at least 97% of the principal and accrued interest. The rating agency says that Navient Solutions, which will service all of the loans in the trust, is the largest servicer of FFELP and private students loans, servicing 151 FFELP student loan transactions as of June 2021.
DBRS says more than 78% of the loans are in repayment with a weighted average in-repayment seasoning of about 93 months, and that borrowers who have been repaying loans for lengthy periods are less likely to default than those just entering repayment.
Nearly 74% of the loans collateralizing the notes are FFELP consolidated loans, and 94.4% of the loans were disbursed before Oct. 1, 2007, which means they earn a higher special allowance payment than loans disbursed on or after that date.
DBRS rates the entire deal AAA.
