Sallie Mae Bank is sponsoring $2.2 billion in asset-backed securities (ABS) through the SMB Private Education Loan Trust 2024-A, giving the student loan ABS sector what appears to be its first recorded deal of the year.
J.P.Morgan Securities is the manager on the deal, known as SMB 2024-A, according to Asset Securitization Report's deal database. The transaction will issue five tranches of class A, B, C and D notes, according to analysts from DBRS Morningstar that assigned ratings. The notes benefit from subordination, a cash reserve account and excess spread. All of the notes have a final maturity date of March 15, 2056, according to DBRS.
Some 69.8% of the notes pay a fixed rate, while 30.2% of the collateral is benchmarked to the Secured Overnight Financing Rate (SOFR), according to DBRS analysts. The underlying student loans are of high credit quality, too, with borrowers that have weighted average (WA) FICO scores of 744 and remaining terms of 170 months. Slightly more than one third of the loans, 31.9%, are in active repayment, while a little more than half of the underlying borrowers, 52.4%, are still in school, analysts said.
Most of the securitized notes are benchmarked to the three-month interpolated yield curve, according to the Asset Securitization Report's deal database. Just one tranche is the exception, the A1B piece. There the notes are pegged to the three-month SOFR. Spreads are expected to come in at 120 basis points over the 3M, I-Curve on the A1A notes and then range from 185 bps—425 bps over the 3M, I-Curve on the class B through class D notes. The notes in the A1B tranche, meanwhile, come in at a spread of 145 bps over the 3M SOFR.
The collateral, which has a cutoff date of February 1, contains about 135,916 private student loans, originated under Sallie Mae Bank's Smart Option product, and they have an average balance of about $16,862, according to Moody's Investors Service, which also rated the notes. The assets have a WA annual interest rate of 11.4%, Moody's said.
DBRS assigned ratings of AAA to the A1A and A1B notes; AA to the class B notes; A to the class C notes and BBB to the class D notes. Moody's, meanwhile, assigned Aaa ratings to the class A notes, but did not rate any of the other tranches.
