OREANDA-NEWS. Fitch Ratings has affirmed the class A note issued by North Texas Higher Education Authority, Inc. Series 2012-1 at 'AAAsf'. The Rating Outlook remains Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral consists of 100% (including 8% of Rehab loans) of Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U. S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch currently rates the U. S. 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of April 1, 2016, total parity is 107.85%. The trust is a turbo structure; therefore, no cash is released until the note is paid in full.

Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.25% of the pool balance and $694,800.

Acceptable Servicing Capabilities: Higher Education Servicing Corporation (HESC) is the master servicer and also provides day-to-day servicing for approximately 34% of the loans. Edfinancial Services, LLC (Edfinancial) services approximately 59% of the loans, and Nelnet Servicing, LLC services the remaining 7%. Pennsylvania Higher Education Assistance Agency is the backup servicer for the loans serviced by HESC and Edfinancial. All servicers have demonstrated adequate servicing capabilities.

In certain LIBOR-down interest rate stress scenarios the basis spread may be compressed, as Fitch would apply a floor to one-month LIBOR at a negative rate level in accordance with Fitch's 'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds' dated May 2016. Since the updated interest rate stresses are not addressed yet in existing FFELP criteria, this represents a criteria variation. Use of the criteria variation did not have a measurable impact upon the ratings assigned.

Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated May 14, 2014, Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness. The definition of the permitted investment for this deal allows possibility of using investments not rated by Fitch, this represents a criteria variation. Since the only available funds to invest in are those held in the Collection Account and the funds can only be invested for a short duration of three months given the payment frequency of the notes, Fitch doesn't believes such variation have a measurable impact upon the ratings assigned.

RATING SENSITIVITIES

Since FFELP student loan ABS rely on the U. S. government to reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the 'AAA' U. S. sovereign rating. Aside from the U. S. sovereign rating, defaults and basis risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults and basis shock beyond Fitch's published stresses could result in future downgrades. Likewise, a buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

DUE DILIGENCE USAGE

Fitch was not provided due diligence information from any third parties relating to the North Texas Higher Education Authority, Inc. Series 2012-1 Trust.