Minnesota Office of Higher Education, 2023 senior series, is preparing to issue $53.7 million in a series of senior revenue bonds, backed by private student loans.
Slated to close on June 1, the deal is known as MOHE and will use a portion of the bond proceeds to refund about $14.4 million of loans and about $71.8 million in cash from the deal’s 2012 trust. The trust will use the cash to purchase $33.6 million of eligible loans from MOHE’s loan capital fund, according to a pre-sale report from S&P Global Ratings.
When originating $35.9 million in new loans, says S&P, MOHE must comply with certain loan criteria under its SELF VI program, which applies to loans that are not guaranteed or insured, and that are originated during a period that ends Feb. 1, 2025, according to the rating agency.
Loans that have yet to be originated must adhere to certain limitations, S&P said, including that no more than $719,870 of originations can consist of loans made to students attending proprietary schools, with a cosigner that has a FICO score of less than 670, according to S&P. Loans to borrowers attending proprietary schools can make up no more than $1.7 million of the loans in the SELF VI program, and at least $14.3 million of the loans must be made to students attending non-proprietary schools, where the co-signer has a FICO score of at least 740.
A debt service reserve fund will support the bonds’ timely repayment, and funded at closing with $2.5 million, which should equal about 2.0% of the outstanding bond principal amount, the rating agency said.
The pool has an aggregate loan balance of $149.8 million, according to the rating agency. Some 13,202 borrowers are in the pool carrying 20,587 loans, with an average balance outstanding principal balance of $7,277. On a weighted average (WA) basis the loans have an average borrower interest rate of 5.9%, and a remaining term of 162 months.
Most of the loan pool, some 18,204 loans, were extended to borrowers attending four-year schools, and co-signers with FICO scores between 740-850 account for the largest loan count, 10,193, S&P said.
S&P intends to assign ratings of ‘AA’ on all classes of the fixed-rate notes, which have maturity dates ranging from Nov. 1, 2027 through Nov. 1, 2042.
