Fitch Ratings has taken various rating actions on the notes issued by four
All four trusts are comprised of Federal Family Education Loan Program (FFELP) student loans.
RATING ACTIONS
ENTITY/DEBT RATING PRIOR
A-6 64033HAA7
LT AAAsf Affirmed AAAsf
B 64031QCU3
LT Asf Affirmed Asf
A 64032AAA3
LT AAAsf Affirmed AAAsf
B 64032AAB1
LT AAsf Affirmed AAsf
A 64031CAA0
LT AAsf Downgrade AAAsf
B 64031CAB8
LT Asf Affirmed Asf
A 64033EAA4
LT AAAsf Affirmed AAAsf
B 64033EAB2
LT AAsf Affirmed AAsf
VIEW ADDITIONAL RATING DETAILS
TRANSACTION SUMMARY
As discussed below, Fitch reviewed assumptions under the coronavirus baseline scenario. No revisions were made to the sustainable constant default rate (sCDR). The sustainable constant prepayment rate (sCPR) assumption was lowered for
The Rating Outlooks for all of the 'AAAsf' rated notes were revised to Negative from Stable on
KEY RATING DRIVERS
Collateral Performance:
Basis and Interest Rate Risk: Basis risk for these transactions arises from any rate and reset frequency mismatch between interest rate indices for Special Allowance Payments (SAP) and the securities. As of the current reporting period, 100%, 100%, 91.1% and 97.1% of the student loans are indexed to one-month LIBOR for
Payment Structure: CE is provided by overcollateralization (OC), excess spread and for the class A notes and subordination. As of the current reporting period, for
As of the current reporting period, for
Operational Capabilities: Day-to-day servicing are provided by
Coronavirus Pandemic's Impact: Fitch's baseline (rating) scenario assumes an initial activity bounce in 3Q20 followed by a slower recovery trajectory from 4Q20 onward amid high unemployment and further pullback in private-sector investment. To assess the sustainable assumptions, Fitch assumed a decline in payment rates and an increase in defaults to previous recessionary levels for two years and then a return to recent performance for the remainder of the life of the transactions. Reflective of this analysis, Fitch maintained or adjusted the sCDR and sCPR cashflow model assumptions as indicated earlier.
The risk of negative rating actions will increase under Fitch's coronavirus downside scenario, which contemplates a more severe and prolonged period of stress with a halting recovery beginning in 2Q21. As a downside sensitivity reflecting this scenario, Fitch increased the default rate, IBR and remaining term assumptions by 50%. The results are provided in the Rating Sensitivities below.
RATING SENSITIVITIES
'AAAsf' rated tranches of most FFELP securitizations will likely move in tandem with the
This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. Fitch conducts credit and maturity stress sensitivity analysis by increasing or decreasing key assumptions by 25% and 50% over the base case. The credit stress sensitivity is viewed by stressing both the base case default rate and the basis spread. The maturity stress sensitivity is viewed by stressing remaining term, IBR usage and prepayments. The results below should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Credit Stress Sensitivity
Default decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Basis Spread decrease 0.25%: class A 'AAAsf'; class B 'AAAsf'
Maturity Stress Sensitivity
CPR increase 25%: class A 'AAAsf';' class B 'AAAsf'
IBR usage decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Remaining Term decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAAA 'sf'; class B 'AAsf'
Default increase 50%: class A 'AAAsf'; class B 'Asf'
Basis spread increase 0.25%: class A 'AAAsf'; class B 'Asf'
Basis spread increase 0.50%: class A 'Asf'; class B 'BBsf'
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf'
CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf'
IBR usage increase 25%: class A 'AAAAsf'; class B 'AAAsf'
IBR usage increase 50%: class A 'AAAsf'; class B 'AAAsf'
Remaining Term increase 25%: class A 'AAAsf'; class B 'AAAsf'
Remaining Term increase 50%: class A 'AAAsf'; class B 'AAAsf'
As a sensitivity under Fitch's coronavirus downside scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under this scenario, the model-implied ratings were 'AAAsf' and 'Asf' for the class A and B notes, respectively, for the credit stress. The model-implied ratings were 'AAAsf' for both the class A and class B notes, respectively, for the maturity stress under increased IBR and 'AAAsf' for both the class A and class B notes under increased remaining term.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Credit Stress Sensitivity
Default decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Basis Spread decrease 0.25%: class A 'AAAsf'; class B 'AAAsf'
Maturity Stress Sensitivity
CPR increase 25%: class A 'AAAsf';' class B 'AAAsf'
IBR usage decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Remaining Term decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAAsf'; class B 'Asf'
Default increase 50%: class A 'AAAsf'; class B 'Asf'
Basis spread increase 0.25%: class A 'AAAsf'; class B 'Asf'
Basis spread increase 0.50%: class A 'AAAsf; class B 'BBBsf'
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf'
CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf'
IBR usage increase 25%: class A 'AAAsf'; class B 'AAAsf'
IBR usage increase 50%: class A 'AAAsf; class B 'AAAsf'
Remaining Term increase 25%: class A 'AAAsf'; class B 'AAAsf'
Remaining Term increase 50%: class A 'AAAsf'; class B 'AAAsf'.
As a sensitivity under Fitch's coronavirus downside scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under this scenario, the model-implied ratings were 'AAAsf' and 'Asf' for the class A and B notes, respectively, for the credit stress. The model-implied ratings were 'AAAsf' for both the class A and class B notes, respectively, for the maturity stress under increased IBR and 'AAAsf' for both the class A and class B notes under increased remaining term.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Credit Stress Sensitivity
Default decrease 25%: class A 'AAAsf'; class B 'AAsf'
Basis Spread decrease 0.25%: class A 'AAAsf'; class B 'AAsf'
Maturity Stress Sensitivity
CPR increase 25%: class A 'AAsf'; class B 'AAsf'
IBR usage decrease 25%: class A 'Asf'; class B 'Asf'
Remaining Term decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAAsf'; class B 'BBBsf'
Default increase 50%: class A 'AAAsf'; class B 'Asf'
Basis spread increase 0.25%: class A 'AAAsf'; class B 'Asf'
Basis spread increase 0.50%: class A 'AAAsf'; class B 'BBBsf'
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'Bsf'; class B 'Bsf'
CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf'
IBR usage increase 25%: class A 'BBBsf'; class B 'BBBsf'
IBR usage increase 50%: class A 'BBBsf'; class B 'BBBsf'
Remaining Term increase 25%: class A 'Bsf'; class B 'Bsf'
Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'
As a sensitivity under Fitch's coronavirus downside scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under this scenario, the model-implied ratings were 'AAAsf' and 'Asf' for the class A and B notes, respectively, for the credit stress. The model-implied ratings were 'BBBsf' for both the class A and class B notes, respectively, for the maturity stress under increased IBR and 'CCCsf' for both the class A and class B notes under increased remaining term.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Credit Stress Sensitivity
Default decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Basis Spread decrease 0.25%: class A 'AAAsf'; class B 'AAsf'
Maturity Stress Sensitivity
CPR increase 25%: class A 'AAAsf'; class B 'AAAsf'
IBR usage decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Remaining Term decrease 25%: class A 'AAAsf'; class B 'AAAsf'
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAAsf'; class B 'Asf'
Default increase 50%: class A 'AAAsf'; class B 'BBBsf'
Basis spread increase 0.25%: class A 'AAAsf'; class B 'Asf'
Basis spread increase 0.50%: class A 'AAAsf; class B 'Asf'
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf'
CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf'
IBR usage increase 25%: class A 'AAAsf'; class B 'AAAsf'
IBR usage increase 50%: class A 'AAAsf; class B 'AAAsf'
Remaining Term increase 25%: class A 'AAAsf'; class B 'AAAsf'
Remaining Term increase 50%: class A 'AAsf'; class B 'Asf'
As a sensitivity under Fitch's coronavirus downside scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under this scenario, the model-implied ratings were 'AAAsf' and 'BBBsf' for the class A and B notes, respectively, for the credit stress. The model-implied ratings were 'AAAsf' for both the class A and class B notes, respectively, for the maturity stress under increased IBR and 'AAAsf' and 'Asf' for the class A and class B notes under increased remaining term.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Additional information is available on www.fitchratings.com
(C) 2021 Electronic News Publishing, source