Fitch Takes Various Actions on SLM 2006-1
--Class A-4 affirmed at 'AAAsf'; Outlook Stable;
--Class A-5 downgraded to 'Bsf' from 'AAAsf'; removed from Rating Watch Negative and assigned Outlook Stable;
--Class B downgraded to 'Bsf' from 'AA-sf'; removed from Rating Watch Negative and assigned Outlook Stable.
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, 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 15.75% and a 47.25% 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 11.9%, 15.8%, 15.6% 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 Student Loan ABS (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
CRITERIA VARIATIONS
Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated
RATING SENSITIVITIES
'AAAsf' rated tranches of most FFELP securitizations will likely move in tandem with the
Fitch conducted a CE sensitivity analysis by stressing both the related lifetime default rate and basis spread assumptions. In addition, Fitch conducted a maturity sensitivity analysis by running different assumptions for the IBR usage and prepayment rate. The results below should only be considered as one potential model implied outcome as the transaction is exposed to multiple risk factors that are all dynamic variables.
Credit Stress Rating Sensitivity
--Default increase 25%: class A 'CCCsf'; class B 'CCCsf'
--Default increase 50%: class A 'CCCsf'; class B 'CCCsf'
--Basis Spread increase 0.25%: class A 'CCCsf'; class B 'CCCsf'
--Basis Spread increase 0.50%: class A 'CCCsf'; class B 'CCCsf'
Maturity Stress Rating Sensitivity
--CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf'
--CPR increase 100%: class A '
--IBR Usage increase 100%: class A 'CCCsf'; class B 'CCCsf'
--IBR Usage decrease 50%: class A 'CCCsf'; class B 'CCCsf'
The stresses are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration in trust performance. Rating sensitivity should not be used as an indicator of future rating performance.
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.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01
https://www.fitchratings.com/site/re/886006
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub.
https://www.fitchratings.com/site/re/888492
Global Structured Finance Rating Criteria (pub.
https://www.fitchratings.com/site/re/883130
Rating
https://www.fitchratings.com/site/re/889777
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014871
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014871
Endorsement Policy
https://www.fitchratings.com/regulatory
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Copyright © 2016 by Fitch Ratings, Inc.,
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from
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Fitch Takes Various Actions on SLM 2007-3
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