Morningstar DBRS Assigns Provisional Credit Rating to SMB Asset-Backed Repackaging Trust 2024-R1

DBRS, Inc. (Morningstar DBRS) assigned a provisional credit rating to a class of notes to be issued by SMB Asset-Backed Repackaging Trust 2024-R1 (SMB 2024-R1) as follows:

-- $68,400,000 Fixed Rate Class M Notes rated A (low) (sf)

SMB 2024-R1 is a resecuritization of a portion of the amounts available to the Class R notes (residual interests) from the following two outstanding securitizations sponsored, administered, and serviced by Sallie Mae Bank (SMB): SMB Private Education Loan Trust 2020-PT-A (SMB 2020-PT-A) and SMB Private Education Loan Trust 2020-PT-B (SMB 2020-PT-B, collectively with SMB 2020-PT-A, the underlying securitizations). The underlying securitizations consist entirely of private student loans that were made and underwritten under SMB’s Smart Option student loan program.

The credit rating is based on Morningstar DBRS’ review of the following analytical considerations:

-- The transaction assumptions consider Morningstar DBRS’ baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios for Rated Sovereigns: March 2024 Update,” published on March 27, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.
-- The form and sufficiency of available credit enhancement related to the underlying securitizations.
-- The form and sufficiency of available credit enhancement for the Class M Notes
-- Reserve account amounts and excess spread create credit enhancement levels and liquidity that are commensurate with the proposed rating.
-- Transaction cash flows are sufficient to repay investors under the A (low) (sf) stress scenarios in accordance with the terms of the SMB 2024-R1 transaction documents.
-- The quality and credit characteristics of the student loans and borrowers in the underlying securitizations.
-- SMB’s capabilities with regard to originations and underwriting.
-- Morningstar DBRS 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 in the underlying securitizations and other required activities.
-- Morningstar DBRS 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 legal opinions related to each underlying securitization that 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 the consistency with Morningstar DBRS's Legal Criteria for U.S. Structured Finance methodology.

Morningstar DBRS’ credit rating on the security referenced herein addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for the rated notes are the related Class M Noteholders’ Interest Distribution Amount, including the related Class M Note Interest Shortfall, and the related note balance.

Morningstar DBRS’ credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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 Morningstar DBRS 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, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) at https://dbrs.morningstar.com/research/427030.

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

The principal methodology applicable to the credit rating is Rating U.S. Structured Finance Transactions (February 22, 2024), https://dbrs.morningstar.com/research/428503.

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

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.

Morningstar DBRS 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned security and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit rating on the above-mentioned security is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit rating.

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

DBRS, Inc.
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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://dbrs.morningstar.com/about/methodologies.

-- Rating U.S. Private Student Loan Securitizations (October 25, 2023), https://dbrs.morningstar.com/research/422385

-- Operational Risk Assessment for U.S. ABS Servicers (March 21, 2024), https://dbrs.morningstar.com/research/430003

-- Operational Risk Assessment for U.S. ABS Originators (March 21, 2024), https://dbrs.morningstar.com/research/430004

-- Legal Criteria for U.S. Structured Finance (December 7, 2023), https://dbrs.morningstar.com/research/425081

-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.