The market for private credit student loans ABS opened up last week with a Sallie Mae deal that offered access to the first subordinate class of these bonds, since 2007.
Sallie Mae’ $2 billion SLM Private Education Loan Trust 2013-A offered both fixed and floating rate tranches. The final pricing of on the ‘A2’/ ‘A’, 5.66 year class B, subordinate notes was 237.5 basis points over Interpolated swaps.
Analysts at Deutsche Bank said in a report on Friday that that the tranche was most likely included because of the “the magnitude of the recent tightening in the secondary market.”
Seasoned SLMA private credit subordinates last traded in the 675-700bp area, but pricing is likely to tighten on the back of this latest print, according to a JP Morgan report published on Friday.
“We tightened our indicative spreads for private credit student loan subordinates to 550bp this week,” said analysts at JP Morgan. “The fact that SLMA is able to issue subordinates again, to a receptive market, should support a further spread rally and improve liquidity in the private credit ABS sector.”
SecondMarket Platform Helps
Trading of student loan securities will also get a push from SecondMarket’s new trading platform for these securities that was unveiled today. The company is leveraging its expertise on trading student loan-backed auction-rate securities. SecondMarket has facilitated over $40 billion in primary issuances and $6 billion in secondary student loan-backed auction-rate securities.
The new platform would allow issuers to sell and purchase student loan-backed securities to a new set of investors.
Historically, only a small group of investors have participated in student loan offerings but the platform gives issuers access to the deep, curated pool of institutional investors that SecondMarket has developed over the past eight years, the company said in a press release today.
Access to new capital and expansion of the traditional investor base could potentially bring more competitive pricing to these securities.
SecondMarket said that the platform also allows issued to distribute reports to their bondholders and student loan issuers can also purchase third party-issued bonds.
“As the recognized leader in the auction-rate securities market, we’ve developed extraordinary relationships in the student loan industry,” said SecondMarket founder and CEO Barry Silbert. “Whether an issuer is raising capital, communicating with their stakeholders or looking for market intelligence, we will provide a complete set of services to meet all of an issuer’s transactional needs.”