NelNet is shipping its fifth student loan securitization of 2014. The $603 million deal, NSLT 2014-5, is backed entirely by Federal Family Education Loan Program (FFELP) loans, inlcuding Stafford loans, PLUS loans, consolidation and rehabilitated loans, according to Moody’s Investors Service.

Moody’shas assigned preliminary ratings to the deal. The $587 million of class A, floating-rate notes will be rated ‘Aaa’ and the $16 million of class, floating-rate notes will be rated ‘A3’. Interest on the floating rate notes will be paid monthly and will be equal to the one-month LIBOR rate plus a spread.

Citigroup, BMO Capital Markets and Wells Fargo Securities are the lead underwriters on the deal.

All of the loans are reinsured by the U.S. Department of Education for at least 97% of defaulted principal and accrued interest. 

Approximately 51% of the pool balance is eligible to receive interest rate reductions after making a certain number of on-time payments, according to the presale report. Moody’s said that the deal, as a result of the higher level of borrower benefits, is structured with greater excess spread that the issuer’s previous deal, NSLT 2014-4.

“We expect the excess spread for this transaction to average between 70 and 90 basis points per annum, more than we expected for NSLT 2014-4,” the report states.  

Rehabilitated FFELP student loans make up 19.8% of the pool, the same as NSLT 2014-4. A rehabilitated FFELP student loan is a loan that had previously defaulted, but the borrower has subsequently made at least nine on-time payments in full to the guarantee agency.  Moody’s expects rehabilitated FFELP loan pools to experience a higher net loss rate compared with pools of non-rehabilitated FFELP loans.


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