Student loan ABS

NSLT 2025-D comes to market as the private student loan sector is seeing increased issuance. Two of the program's deals, series 2025-B and 2025-C, accounted for $4 billion of issuance, almost half the sector's production.

The 2025A bonds will have parity with all senior bonds that have been previously issued, and any senior bonds issued in future deals.

Credit enhancement could increase for the most senior outstanding classes of notes, however, as the notes repay investors sequentially over time.

Most of the capital structure will pay fixed-rates to noteholders, except for the A1B notes, which offers floating-rate notes pegged to the one-month SOFR.

Most of the pool, 68.6%, is in the repayment phase, while 19.1% of the loans in the pool are in deferment.

Credit support to the bonds range from 28.48% to 32.30%. They provide coverage of about 3.0x-3.4x of its base-case net loss in the 'A' stressed, break-even cash flow scenarios.

All the notes have credit enhancement totaling 28.3% of the pool balance, rating agencies said.

A vast majority of borrowers have either graduated from one of MPOWER's eligible graduate degree programs in science, technology, engineering and math (STEM) or business.

Borrowers' high incomes and the abundance of monthly free cash flow speed up repayments and mitigate the transaction's exposure to economic downturns.

Almost all the collateral was extended to borrowers attending four-year schools, and the same percentage was made to borrowers attending not-for-profit schools.

The $1 billion securitization includes a $424 million fixed rate Aaa-rated portion with a yield of 5.133% as well as a $424 million floating Aaa-rated portion priced at 110 basis points over the Secured Overnight Financing Rate.

The agency wants the National Collegiate Student Loan Trusts, which sell student loan asset-backed securities (ABS) to investors, to pay $2.25 million in fines to borrowers.

Any risk of mis-matching of fixed and floating rates among the assets and transaction notes is minimal. Between 80%-90% of the notes pay a fixed rate, while 78% of the loans are fixed rate.

The bonds exist with several redemption provisions, including the first maturity date, a special redemption option from excess revenues, and a special mandatory redemption from excess revenues.

This is ECMC's first securitization of a pool of rehabilitated loans since 2021.

The action stems from 2017, when the CFPB filed a lawsuit claiming Navient steered borrowers who might have qualified for income-driven repayment plans into more expensive forbearance instead.

The AA, A and BBB notes have 12.7%, 12.5% and 7.0% in credit support, which included excess spread.

Firstrust Savings Bank and First Citizens Bank originated the loans, all of which are in-school, and a vast majority of the loans in the pool, 82.0%, are fixed rate.

The securitization amount is smaller than an earlier transaction, and its AAA notes are expected to price at wider spreads than the AAA notes on the 2024-A series.

Note payments are linked to two tranched credit default swap (CDS) transactions, one related to the reference obligation between the issuer and SoFi Bank and SoFi Lending and the Issuer.