--Class A-4 affirmed at 'AAAsf'; Outlook Stable;
--Class A-5 downgraded to 'Bsf' from 'AAAsf'; removed from Rating Watch Negative and assigned Stable Outlook;
--Class B downgraded to 'Bsf' from 'AA-sf'; removed from Rating Watch Negative and assigned Stable Outlook.
The class A-5 notes miss their legal final maturity date under both Fitch's credit and maturity base cases. This technical default would result in interest payments being diverted away from class B, which would cause that note to default as well. In downgrading to 'Bsf' rather than 'CCCsf' or below, which constitutes a criteria variation, Fitch has considered qualitative factors such as Navient's ability to call the notes upon reaching 10% pool factor, the revolving credit agreement in place for the benefit of the noteholders, and the eventual full payment of principal in modelling. Based on the current trajectory of the pool, Fitch estimates in six to nine months the pool factor will reach 10% which will cause the trust to stop releasing cash and give Navient the option to call the bonds.
The trust has entered into a revolving credit agreement with Navient by which it may borrow funds at maturity in order to pay the off notes. Because Navient has the option but not the obligation to lend to the trust, Fitch cannot give full quantitative credit to this agreement. However, the agreement does provide qualitative comfort that Navient is committed to limiting investors' exposure to maturity risk.
KEY RATING DRIVERS
Collateral Performance: Fitch assumes a base case default rate of 18.00% and a 54.00% default rate under the '
The trailing 12 month average of deferment, forbearance, income-based repayment (prior to adjustment) and constant prepayment rate (voluntary and involuntary) are 12.1%, 16.8%, 14.4% and 11.3%, respectively, which are used as the starting point in cash flow modelling. Subsequent declines or increases are modelled as per criteria. The borrower benefit is assumed to be approximately 0.01%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this transaction as per criteria.
Payment Structure: Credit enhancement is provided by excess spread, overcollateralization, and for the class A notes, subordination. As of
Maturity Risk: Fitch's SLABS cash flow model indicates that the A-4 notes are paid in full on or prior to the legal final maturity date under the '
Operational Capabilities: Day-to-day servicing is provided by
For transactions in surveillance, Fitch will treat certain assets such as claims filed as short-term assets in its cash flow analysis. Given that Fitch's current criteria is silent on the treatment of such assets, this treatment is considered a criteria variation.
Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated
Fitch assumed a base case default rate for the credit stresses based on actual trust performance, which is higher than the output from its Default Model. There is no rating impact from such variation.
While under Fitch's maturity and credit base case scenarios the class A-5 notes miss their legal final maturity date, and the class B notes suffer an interest shortfall due to the default of the class A-5 notes, Fitch is downgrading to 'Bsf', rather than 'CCCsf' or below, which constitutes a criteria variation.
Since the FFELP student loan ABS relies on the
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.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub.
Global Structured Finance Rating Criteria (pub.
Dodd-Frank Rating Information Disclosure Form
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Source: Fitch Ratings