Vermont Student Assistance Corp is preparing to issue a pool of asset-backed bonds secured by private, fixed-rate student loans sourced through its Student Advantage and Parent Advantage loan programs, raising about $20 million in a deal slated for a mid-June closing.
Like the underlying collateral, all of the notes in the deal are fixed, according to ratings analysts from S&P Global Markets. Bank of America Merrill Lynch is manager on the deal, which offers 12 tranches of senior notes with maturity dates ranging from June 15, 2029 through June 15, 2040. In addition to their fixed rates, the notes are tax-exempt.
S&P reports that the bonds have about 25.9%-26.4% in credit support, based on its scenarios for stressed, break-even cash flow, and those levels of coverage provide 5.4x-5.5x coverage for the bonds. The transaction also has about 137.5% in expected senior bond parity and 124.1% in subordinate bond parity levels, S&P analysts said. Excess cash can be released from the trust as long as the total parity is at least 120.0% and the senior parity is at least 125.0% immediately following the release.
The notes also have a fully funded debt reserve fund, which is equal to either 2.0% of the outstanding bond principal balance and $1 million, whichever is greater.
S&P notes that 8,350 borrowers are in the pool, and the loans have an average balance of $17,254. On a weighted average (WA) basis, the loans have an interest rate of 5.92%, an original term of 169 months and an average co-signer FICO score.
Drilling down further in the collateral pool, the bulk of loans are extended to four-year undergraduate students whose loans are in repayment status and slightly less than half, or 41.66%, are deferred. A vast majority of the loans, 83.23%, are current, S&P said. Deferred repayments account for 41.6% of the pool, and immediate repayments account for 25.9%, according to S&P. As for the status of the loans, a large majority of them, 83.9% of the pool is in repayment, in-school deferred loans account for 10.27% and interest-only repayments account for 4.34%.
Both S&P assigned ratings to the notes, according to Asset Securitization Report's deal database, and assign A ratings to all the notes.
