Navient Private Education Refi Loan Trust, 2022-A, is preparing to issue $730.9 million in asset-backed securities, in a deal secured by a pool of private student loans.
BofA Securities, Barclays Capital, Credit Suisse Securities, J.P. Morgan Securities and RBC Capital Markets will be initial note purchasers in the transaction.
Navient Private Education Trust, 2022-A, will issue the notes through a relatively short-term, sequential pay structure, according to a presale report from Moody’s Investors Service. The agency expects to assign ‘Aaa’ ratings to the fixed-rate, class A notes.
As for the collateral pool’s remaining term, the underlying loan pools have 154 months left, on a weighted average (WA) basis. This compares with remaining terms of 160 to 190 months for other ABS deals backed by private student loans, Moody’s said.
Credit enhancement for the class A notes will grow over time, as the transaction will use excess spread to turbo the notes until the overcollateralization (OC) amount reaches a specified amount. That amount will be the greater of 5.65% of the outstanding pool balance and $11.5 million.
Moody’s notes that high quality private student loans, particularly those made to borrowers who are refinancing outstanding debt, collateralized the transaction. On a weighted average basis, borrowers in the underlying pool have a credit score of 764, a verified annual income of $134,757, and monthly free cash flow of $4,721.
Not all aspects of the deal are a credit strength, however. Moody’s noted that Naviet Private Education Trust, 2022-A, has limited loan performance data. Earnest Operations, an indirect majority-owned subsidiary of Navient Corp., originated all of the loans in the deal, and about all of them were originated after December 2020. Navient also made significant changes to its underwriting guidelines of the NaviRefi loans from December 2020 through April 2021, which aligns them closer with guidelines for the Earnest Operations loans.
Consequently, the repayment, loss and delinquency data do not span a complete economic cycle, barely enough to inform the rating agency’s expectations.
The loans underpinning Navient Private Education Trust, 2022-A are concentrated in the medical, business and legal fields, whose borrowers live in major metropolitan areas.
“We observed a large spike in forbearance utilization in refi deals, that typically have a large exposure to borrowers from the health care sector,” Moody’s said. “Elective medical procedures were temporarily suspended during the pandemic and borrowers were unable to work.”
