NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the senior and junior subordinate notes, and downgraded the subordinate note for PARTS Private Student Loan Trust Series 2007-CT1. Fitch maintains a Negative Outlook on the senior note. Fitch used its 'Global Structured Finance Rating Criteria' and 'U.S. Private Student Loan ABS Criteria' to review the transaction. The ratings actions are detailed at the end of this press release.
KEY RATING DRIVERS
The affirmation on the senior note reflects sufficient loss coverage multiples to support the existing rating. The Negative Outlook is maintained on the senior note due to deteriorating collateral performance.
The junior subordinate note is affirmed at 'C' due to under-collateralization and insufficient coverage for principal payment. The downgrade on the subordinate note reflects deteriorating performance and insufficient loss coverage multiples to support existing rating. The level of defaults has increased to 18.65% from 15.66% last year, and subordinate and total parity levels have continued to decrease from the previous year (February 2012) to the current (February 2013), from 99.23% to 97.41% and 88.33% to 86.10% respectively. The trust has continued to show deterioration in excess spread.
Loss coverage multiples were determined by comparing the projected net loss amount to available credit enhancement (CE). Fitch used market vintage loss data to form a loss timing curve representative of the collateral pool. After giving seasoning credit for those loans in repayment, Fitch applied the current cumulative gross loss level to the loss timing curve to derive the expected gross losses over the remaining life. Fitch estimated the remaining gross defaults for the trust are approximately 15%-20%.
No credit is given to recovery, as data provided indicated minimal recovery after loans defaulted.
The Recovery Estimate for the class B notes is RE 35% and for the class C note is RE 0%.
CE consists of excess spread and overcollateralization. Furthermore, senior notes benefit from additional credit enhancement provided by the subordinate notes. Fitch assumed excess spread to be the lesser of the current annualized excess spread; the average historical excess spread; and the most recent 12-month average excess spread. That same rate was applied over the remaining life.
The collateral securing the notes are private loans originated according to either TERI or LEARN underwriting guidelines. PHEAA services the loan portfolio.
RATING SENSITIVITIES
As Fitch's base case default proxy is derived primarily from historical collateral performance, actual performance may differ from the expected performance, resulting in higher loss levels and/or prepayment speeds than the base case. This will result in a decline in available CE and the remaining loss coverage levels available to the notes. Therefore, note ratings may be susceptible to potential negative rating actions, depending on the extent of the decline in the coverage.
Rating sensitivity results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. Rating sensitivity should not be used as an indicator of future rating performance.
Fitch has taken the following rating actions:
PARTS Private Student Loan Trust Series 2007-CT1
--Class A affirmed at 'Asf', Outlook Negative;
--Class B downgraded to 'CCCsf' from 'B-sf, RE 35%;
--Class C affirmed at 'Csf', RE 0%.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'U.S. Private Student Loan ABS Criteria', Jan. 31, 2012;
--'Global Structured Finance Rating Criteria', June 6, 2012;
--'Counterparty Criteria for Structured Finance Transactions', May 30, 2012.
Applicable Criteria and Related Research
Counterparty Criteria for Structured Finance and Covered Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707155
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923
U.S. Private Student Loan ABS Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698293
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=791466
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