OREANDA-NEWS. March 23, 2016. Fitch Ratings has placed Higher Education Loan Authority of the State of Missouri, Series 2013-1 (MOHELA 2013-1) on Rating Watch Negative

KEY RATING DRIVERS

Maturity Risk: The Rating Watch Negative action is based on the heightened risk of the MOHELA 2013-1 notes missing its legal final maturity date of May 25, 2032, which would result in an event of default. In an event of such technical default, Fitch would expect ultimate repayment of full principal and interest after the legal final. Fitch expects to resolve the Rating Watch Negative status once its revised FFELP criteria report is published. The magnitude of any potential rating action could vary depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors

High Collateral Quality: The trust collateral consists 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. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement (CE): Credit Enhancement is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of January 2016, total parity is 105.83%. Excess cash is not being released as the specified OC target (greater of 9.09% of the adjusted pool balance and \\$30 million) is maintained.

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 \\$1,449,864.

Acceptable Servicing Capabilities: Higher Education Loan Authority of the State of Missouri (MOHELA) services 100% of the 2013-1 portfolio. In Fitch's opinion, MOHELA is an acceptable servicer of FFELP student loans.

On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria.

RATING SENSITIVITIES
Since the FFELP student loan ABS relies 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, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors 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.

Fitch placed the following rating on Rating Watch Negative:

Higher Education Loan Authority of the State of Missouri, Series 2013-1

--Series 2013-1 notes 'AAAsf'.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.