The Vermont Student Assistance Corp., 2022A, is preparing to issue $20.2 million in education loan revenue bonds in a bid to continue financing private, fixed-rate education loans.
The collateral pool comprises tax-exempt, fixed-rate bonds, which will have credit support ranging from 27.0%-27.8% for the bonds, based on S&P Global Ratings’ ‘A’ stressed break-even cash flow scenarios, the rating agency said in a pre-sale report.
Some 16,740 loans extended to 8,386 borrowers will secure the collateral pool. Borrowers on average have an outstanding balance of $22,911, while the loans have an outstanding balance of $11,477. The bonds will be secured on a parity basis with all previously issued senior bonds and any additional senior bonds that will be issued in the future under the master indenture, the rating agency said.
Initial senior and subordinate bond parity on the deal ranges from about 131.3%-119.9%, respectively, at closing. VSAC 2002A has a fully funded debt service reserve fund, which is equal to the greater of 2.0% of the outstanding bond principal balance, or $500,000.
The bonds benefit from excess cash, which the trust may release as long as the total parity is at least 125.0% and the senior parity is at least 130.0% immediately following the release.
The rating agency said the fixed rate nature of the loans should provide the notes with positive excess spread thanks to the bonds’ expected interest rate and transaction fees.
The trust plans to originate about $25 million in new loans during the loan acquisition and recycling periods, both of which will end on June 15, 2023, using proceeds from both the 2022A and any remaining proceeds from the 2021A bond issuance, according to S&P.
The rating agency expects to assign ‘A’ ratings to all of the notes, which have maturity dates ranging from June 15, 2028, to June 15, 2024.
