DBRS Morningstar Assigns Provisional Ratings to SMB Private Education Loan Trust 2023-C

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the classes of notes to be issued by SMB Private Education Loan Trust 2023-C (SMB 2023-C) as follows:

-- Fixed Rate Class A-1A Notes rated AAA (sf)*
-- Floating Rate Class A-1B Notes rated AAA (sf)*
-- $30,000,000 Fixed Rate Class B Notes rated AA (sf)

*The allocation of the aggregate initial principal balance of the Class A Notes between the Class A-1A Notes and the Class A-1B Notes will be determined on or before the date of pricing. The aggregate initial principal balance of the Class A Notes will be equal to $364,000,000, of which the issuing entity expects that the initial principal balance of the Class A-1B Notes will be an amount not less than $75,000,000 and not more than $100,000,000. The interest rate for the Class A Notes will be equal to a combination of a fixed rate and a floating rate.

CREDIT RATING RATIONALE/DESCRIPTION
The provisional ratings are based on DBRS Morningstar’s review of the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, “Baseline Macroeconomic Scenarios for Rated Sovereigns: June 2023 Update,” published on June 30, 2023. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.
-- The transaction’s form and sufficiency of available credit enhancement.
-- Overcollateralization, note subordination, reserve account amounts, and excess spread create credit enhancement levels and liquidity that are commensurate with the proposed ratings.
-- Transaction cash flows are sufficient to repay investors under all AAA (sf) and AA (sf) stress scenarios in accordance with the terms of the SMB 2023-C transaction documents.
-- The quality and credit characteristics of the student loans and underlying borrowers.
-- Sallie Mae Bank’s (SMB) capabilities with regard to originations and underwriting.
-- DBRS Morningstar has performed an operational review of SMB’s origination platform and has determined the bank to be an acceptable student loan originator.
-- The ability of the Servicer to perform collections on the collateral pool and other required activities.
-- DBRS Morningstar has performed an operational review of SMB as the servicer and considers the entity an acceptable servicer of private student loans.
-- The legal structure and expected legal opinions that will address the true sale of the student loans, the nonconsolidation of the trust, that the trust has a valid first-priority security interest in the assets, and consistency with DBRS Morningstar's “Legal Criteria for U.S. Structured Finance.”

DBRS Morningstar’s credit rating on the securities listed in the table below addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The DBRS Morningstar short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (July 4, 2023) at https://www.dbrsmorningstar.com/research/416784.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the credit rating is Rating U.S. Private Student Loan Securitizations (October 28, 2022; https://www.dbrsmorningstar.com/research/404500).

Other methodologies referenced in this transaction are listed at the end of this press release.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Rating U.S. Structured Finance Transactions (February 6, 2023;
https://www.dbrsmorningstar.com/research/409449).

-- Operational Risk Assessment for U.S. ABS Servicers (July 20, 2023; https://www.dbrsmorningstar.com/research/417415).

-- Operational Risk Assessment for U.S. ABS Originators (July 20, 2023; https://www.dbrsmorningstar.com/research/417416).

-- Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008).

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687).

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].