Sallie Mae is marketing its third offering of the year of bonds backed by private student loans.
The $674 million SMB Private Education Loan Trust 2016-C will issue four tranches of notes with preliminary ratings from Moody’s Investors Service: $247 million of floating-rate notes with a legal final maturity of November 2023, $228 million of fixed-rate notes due September 2034, and $150 million of floating-rate notes due September 2034 are all rated ‘AAA.’ There is also a $50 million tranche of fixed-rate notes due November 2040 rated ‘Aa3.’
The collateral backing the transaction will consist exclusively of private student loans originated and underwritten by Sallie Mae Bank under the Smart Option Student Loan Program, which does not benefit from a guarantee from the U.S. government. Similar to all of Sallie Mae’s recent deals, the loan pool will consist entirely of what Sallie Mae categorizes as “traditional loans.” These are loans originated to borrowers with an original FICO score of at least 640 if he/she attended a non-profit school or at least 670 if he/she attended a for-profit school. In addition, The traditional loans exclude loans originated to borrowers who attended a school in any one of the top ten defaulting for-profit school groups in Sallie Mae’s portfolio.
Furthermore, the loan pool will include no loans that are past due for more than 30 days on principal or interest payments as of the statistical cutoff date.
Moody’s cumulative net loss expectation for transaction is approximately 10%.
Of note, Sallie Mae Bank only recently acquired the capability to collect on defaulted loans as and it still sells a portion of defaulted loans, rather than handling a recover in-house.