Student loan ABS

There are four risk events that could stop cash flow into SMB 2024-R1's deal—missing overcollateralization targets, a stymied principal distribution and the deals do not exercise an optional clean-up call.

Biden's "Plan B" would see loans reduced or wiped out for millions of Americans — including those whose debt exceeds their original principal amount.

One tranche in the deal, supported by a pool of private student loans, matures every year beginning on June 1, 2029.

The amount of deferred loans allowed in the pool is capped at 70%, with at least 96% of them being cosigned. Also, no more than 6% of loans with a FICO score of less than 700 can be cosigned.

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.

Banks that had financed warehouse facilities and investment firms that previously bought pools of loans from originators and servicers are among student debt holders looking for an exit strategy.

Higher education debt originations are poised to turn a corner next year amid industry changes. The big question for observers is whether securitization will follow in 2024 business.

The deal has 76,440 in underlying loans, compared with 46,671 on the 2023-C deal. The average balance per borrower, however, was just $14,657, compared with the $14,430 on the 2023-C deal.

Esoteric transactions' premiums and longer durations are especially attractive, as other consumer assets are put to the test.

The outstanding notes have 18.6%-19.6% of credit support in place, based on stressed break-even cash flow scenarios.