Despite getting hit with a lawsuit over its student loan servicing practices by the Consumer Financial Protection Bureau, Navient’s joint book runners Bank of America Merrill Lynch, Barclays, and RBC were able to price an asset backed security offering above the one month Libor.
According to a report in Global Capital, Navient’s $270 million in A1 rated notes priced 40 basis points over the one month Libor while the $233 million in A2 notes were priced 75 basis points over the one month Libor. The fact that Navient’s offerings, which are backed by federal family education loans, did not get hurt by the CFPB lawsuit was perceived positively in the marketplace.
The day before the offering was priced Navient announced that it amended agreements for $190 million of Navient bonds backed by federally guaranteed student loans. The amendment extends the final maturity date on certain tranches. Since December of 2015, Naveint said it extended the final maturity dates of $10 billion of bonds backed by FFELP loans.
In January Navient, which is the nation’s biggest services of both federal and private student loans, got hit with a lawsuit by the CFPB which contends it cheated borrowers out of billions of dollar by throwing obstacles in the way of those paying back their student loans. Those obstacles resulted in the borrowers paying higher interest rates and seeing their loan balances balloon. The former unit of Sallie Mae allegedly provided borrowers with the wrong information about paying back loans; additionally, it was known to process payments incorrectly and did little when borrowers actually complained. The CFPB said it was seeking relief for the borrowers Navient services.
Since the middle of January, shares of Navient have taken a hit, down around 8%, in part because of the lawsuit. Navient’s Chief Executive, Jack Remondi, quickly fired back against the CFPB. He claimed that the problems in the student loan servicing market are due to a lack of cooperation and understanding between the Department of Education and CFPB. Remondi said that the industry asked for “clear and consistent” rules for loan servicing repeated times, but these were never clearly delivered which has led to these problems.
Author: Dave Rathmanner
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