Sallie Mae’s proposal to split itself into two publicly traded separate entities -- an education loan management and a consumer banking company -- would be neutral to mildly positive for the company’s ABS.

Standard & Poor’s said in a note today that it did not expect any credit impact on student loan ABS from the announced split. Barclays analysts said in a research note on Wednesday that the split could even be somewhat positive for Sallie Mae deals.

Sallie Mae is among largest issuers of ABS globally, having issued close to $264 billion in Private and FFELP ABS transactions to date.

In 2011, Sallie Mae reestablished programmatic issuance of Private education loan ABS. The company executed 3 transactions in 2011 totaling $2.1 billion; 5 transactions in 2012 totaling $4.2 billion; and year to date 2013 it has executed 3 transactions totaling $2.5 billion.

Barclays said that the split means the Federal Family Education Loan Program (FFELP) servicing business will no longer benefit from revenue generated through private credit student loan origination; but it also means the business won’t be subject to “any current and forthcoming regulatory burdens associated with private credit student loans.”  

Sallie Mae Bank would also no longer benefit from the annuity revenue stream generated by FFELP loan servicing, but the analysts notes that the split means the bank can now “focus all of its efforts on originating private credit loans consistent with the credit characteristics of the originations of the past couple of years while growing its deposit base and expanding into other consumer lending.”  

S&P noted that its ratings on SLM's FFELP and private student loan ABS transactions are not directly linked to the ratings on Sallie Mae. "We do not expect this announcement to affect [Sallie Mae's] current operational roles--as servicer and administrator--in these transactions," said S&P analysts. "We expect it will continue to service the student loan portfolios underlying these transactions in a manner consistent with its past operational practices and in accordance with the transaction documentation requirements."

Most of SLM’s assets would remain in the education loan management company, as would all outstanding corporate debt. Sallie Mae Bank would retain the origination and servicing platforms for SLM’s private credit student loan business, as well as a portfolio of non-securitized private credit student loans originated over the past couple of years. 

Despite the upbeat outlook on ABS, Moody’s Investors Service, S&P and Fitch Ratings all reacted negatively when it came to assessing what impact the change could have on the unsecured credit rating of Sallie Mae.

Fitch downgraded the company to BB+ from BBB-; Moody’s placed its ‘Ba1’ rating on watch negative; and S&P placed its ‘BBB-’/ ‘A-3' rating on watch negative.











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