Merrill Lynch Research Notes Indicate Conduit Could Be Funded Within Next Two Weeks

Here are the notes from the call (call-in number provided below) provided by Merrill Lynch:

Bank of Montreal, as one of six dealers on the Straight-A Conduit Program, hosted a conference call for dealers on Tuesday (April 7th) regarding progress. We learned the following from the call:

• The Department of Education (DOE) has signed off on all Program documents
• The dealer group has been increased from two to six banks
• Dealers have completed “extensive” investor marketing
• Parameters for rating transactions have taken place for at least two issuers and that ratings are anticipated by the dealers next week. We believe that one of these issuers is SLM.
• Bank of Montreal believes that the first funding could take place within the next two weeks.
• The call is available to the public on 1-800-408-3053. Passcode is 8435504.

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Why is this important?

It will significantly improve the liquidity position for Sallie Mae while helping other FFEL lenders to a lesser extent.  SLM has indicated in previous conference calls that they have $16 billion eligible for this program.  With their Asset-Backed Commercial Paper facility (ABCP) maturing at the end of this month (most expect it will roll again), the conduit would provide them with an alternative funding source to enable them to bring down the balances on their current high-cost ABCP facility over time.  Investors seem to have anticipated the conduit coming on line, as Sallie Mae's shares have risen by 77% since March 25th. 

Related posts:

• November 9, 2008:  Plans for Asset-Backed Commercial Paper Conduit unveiled by Department of Education
• January 15, 2009:  Terms and Conditions for Conduit posted in Federal Register
• January 16, 2009:  Department of Education announces finalization of agreements for ABCP facility (the conduit)
• January 21, 2009:  First Student Loan Conduit Created by Dept. of Education
• January 29, 2009:  New Details Emerge About Conduit Plan
• February 2, 2009:  Fitch publishes pre-sale report on Straight A Funding, LLC
• February 4, 2009:  Announcement that Short-Term Loan Purchase program to be extended through end of February
• February 22, 2009:  Wherefore art thou conduit?
• April 10, 2009:  Fitch Rates Straight-A Funding LLC's Student Loan ABCP 'F1+'