Sallie Mae plans to issue its first residual student loan ABS deal in over a decade, according to Fitch Ratings.

The ratings agency assigned preliminary ratings of ‘BBB’ on the $225 million 2013-M1 notes that will be backed by the ownership certificates of residual interests in SLM Student Loan Trust 2006-8, 2006-9 and 2007-1 (the underlying trusts). Fitch currently rates the senior and subordinate notes issued from the underlying trusts ‘AAA’ and ‘BBB’, respectively.

The underlying trusts are collateralized by consolidation loans originated under the Federal Family Education Loan Program (FFELP), with guaranties provided by the U.S. Department of Education for at least 97% of principal and accrued interest.

Sallie Mae, this year, has already executed sales of its residual interest in FFLEP securitizations to third parties, in a bid to boost its balance sheet. In these sales, Sallie Mae continues to service the student loans in the underlying securitization trust, under existing agreements.  

Yesterday the student loan lender announced the sale of the residual interest in its SLM Student Loan Trust 2006-2 securitization to a third party.

The sale reduced Sallie Mae’s student loan assets by $2.03 billion and related liabilities by $1.99 billion, according to a press release. The gain from the transaction will add approximately $.13 to Sallie Mae’s second-quarter 2013 GAAP and core diluted earnings per share.

In February, Sallie Mae sold the residual interest in its SLM Student Loan Trust 2007-4 securitization. The sale removed student loan assets of $3.8 billion and related liabilities of $3.7 billion from Sallie Mae’s balance sheet.

“We believe student loan ABS residuals could be attractive for investors looking for higher yielding assets,” said BofA Merrill Lynch analysts in a February securitization report. “Nevertheless, companies that traditionally hold residuals or first loss positions need to consider investors' sentiments regarding such sales. Many investors prefer to see sponsors retain a position in their ABS.”






Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.