Could NelNet could be coming to market with $1.5 billion in resecuritizations of Federal Family Education Loans?

On Aug. 3, the student loan servicer acquired the residual interest in two securitized student loan trusts collectively holding that amount of assets.

The purchase, disclosed in NelNet’s second quarter results Thursday evening, was funded from the company’s operating cash and unsecured line of credit.

NelNet did not disclose the seller.

Acquiring the residual interest, or most subordinate position, in a securitization could give NelNet the ability to refinance the deals, though such a transaction may require the consent of holders of the notes issued by the trusts, as well.

And, depending on the vintage of the deals, refinancing the notes at lower interest rates or resecuritizing the collateral could generate some income for NelNet.

Resecuritization isn’t the only incentive for NelNet to acquire FFEL, however. It has also been adding to its holdings in order to benefit from economies of scale in its servicing platform. As of June 30, 2015, the company was servicing $169.9 billion in FFELP, private, and government owned student loans, as compared with $150.0 billion of loans as of June 30, 2014.

Some $2.1 billion of that growth came from purchases made in the first half of the year; $1.2 billion were completed in the second quarter.

The average loan portfolio balance was $28.3 billion and $28.2 billion for the three months ended June 30, 2015 and 2014, respectively, and $28.3 billion and $27.0 billion for the six months ended June 30, 2015 and 2014, respectively.

In its earnings report, NelNet said that it intends to use its strong liquidity position to acquire additional Federal Family Education Loans. As of June 30, 2015, $100.0 million was outstanding on the Company's unsecured line of credit and $250.0 million was available for future use. The unsecured line of credit has a maturity date of June 30, 2019.

NeLnet reported GAAP net income of $70.9 million, or $1.54 per share, for the second quarter of 2015, compared with GAAP net income of $75.0 million, or $1.61 per share, for the same period a year ago.

Excluding derivative market value and foreign currency adjustments, net income was $63.5 million, or $1.38 per share, for the second quarter of 2015, compared with $70.2 million, or $1.51 per share, for the same period in 2014

 

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