Fitch Affirms Academic Loan Funding Trust 2012-1 Senior Notes; Outlook Stable
KEY RATING DRIVERS
High Collateral Quality: The trust collateral is comprised of 100% 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 rates the U.S. sovereign government at 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement: Credit Enhancement (CE) is provided by overcollateralization (OC), and the excess spread. As of March 2015, senior parity is 103.56% (3.44% CE). A target total parity of 104% must be met before excess cash can be released from the trust.
Adequate Liquidity Support: Liquidity support is provided by a Debt Service Reserve Fund equal to the greater of 0.10% of the pool balance and \$1,250,000, currently sized at the floor.
Acceptable Servicing Capabilities: Day-to-day servicing is provided by Pennsylvania Higher Education Assistance Agency, Great Lakes Educational Loan Services, Inc. and Xerox Education Services Inc. All servicers are acceptable servicers of FFELP loans
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 credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.
Fitch has affirmed the following ratings:
Academic Loan Funding Trust Series 2012-1
--Class A-1 note at AAAsf; Outlook Stable;
--Class A-2 note at AAAsf; Outlook Stable.
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