Sallie Mae Bank's latest securitization offering will sell a significantly smaller amount of asset-backed securities (ABS), $486 million, through fewer tranches, and with yields that are slightly wider than where the notes from the SMB 2024-A series priced.
Slated to close in mid-May, the capital structure behind SB Private Education Loan Trust, 2024-C, will offer A and B notes through three tranches, with yields ranging from 5.5% on the AAA notes to 6.1% on the AA-rated B tranche, according to Asset Securitization Report's deal database. The AAA notes on the series 2024-A had expected yields of 5.3%, according to the ASR database.
Although smaller by securitization amount, 2024-C has three managers on the deal, Bank of America Merrill Lynch, Barclays, Goldman Sachs and JPMorgan Securities according to ASR's deal database. All of the notes are priced against either the three-month interpolated yield curve or the three-month Secured Overnight Financing Rate (SOFR), according to the database.
Private student loans underwritten under Sallie Mae Bank's Smart Option student loan program provide the collateral to the deal, according to DBRS Morningstar and Moody's Investors Service, which assigned ratings to the notes. Moody's notes that the loan assets have an average outstanding balance of $15,241, and a weighted average annual interest rate of 11.5%.
The SMB structure has several forms of credit enhancement, including overcollateralization, note subordination, reserve account amounts and excess spread, according to DBRS. The trust will repay principal to noteholders sequentially beginning with the class A-1A notes, and then to the class A-1B notes on a pro rata basis, until the balances are paid off in full, according to ratings analysts at DBRS. Principal payments will then shift to class B notes until they are repaid in full.
Moody's also considers the repayment structure a credit strength, and notes that credit enhancement will grow over time as the transaction uses all excess spread to turbo the notes. This mechanism will stay in place until the deal's overcollateralization (OC) amount reaches a of the greater of 25% of the outstanding pool balance or 10.0% of the initial pool balance, Moody's said.
The notes also benefit from a non-declining reserve account.
Repayments begin on June 17, until all the notes reach their expected final maturity date, June 17, 2052.
