Salle Mae Bank's latest securitization of private student loan revenue will raise $1.5 billion from investors, through the SMB Private Education Loan Trust.
The deal uses a pass-through structure, according to Morningstar DBRS, which includes subordination from classes B, C and D, plus reserve accounts and excess spread.
SMB Private Education Loan Trust 2026-B will issue five tranches of classes A, B, C and D notes, which all have a March 15, 2056 legal final maturity date, the rating agency said. The deal is slated to close on April 2.
Loans originated under Sallie Mae's Smart Option loan program, which have demonstrated significantly lower default rates compared with those from the Signature program, make up the entire collateral pool, DBRS said. This is largely due to the credit quality of borrowers in the Smart Option program and tighter underwriting guidelines.
As of the transaction's cutoff date for including 83,110 underlying loans in the pool, borrowers had a weighted average (WA) FICO score of 736. Per borrower, the average loan balance is $18,515, DBRS said.
Other aspects of the borrowers' profile lent themselves to significantly lower probabilities of default, like they primarily attended four-year schools (92.8%) and not-for profit (89.8%) schools, and their loans were co-signed (92.1%).
SMB Private Education Loan Trust 2026-B's credit enhancement levels are sufficient for coverage of about 3.99s, 3.16x, 2.29x and 1,82x the DBRS 9.90% base-case default rate assumption in the AAA, AA, A, and BBB breakeven cash flow stress scenarios, respectively, the rating agency said.
The deal also includes a cumulative default trigger. If such an event occurs, the required class A overcollateralization target will step p to 48.00%, from 23.00%.
SMB will fully fund a reserve account that benefits the senior notes and equals 0.25% of their initial balance, the rating agency said.
DBRS assigns ratings of AAA to the A1A and A1B tranches; AA to the class B notes; and A and BBB to classes C and D tranches, respectively.
