NEW YORK--(BUSINESS WIRE)--Fitch Ratings maintains the Negative Rating Watch on the senior student loan notes currently rated 'AAAsf' issued by State of North Carolina State Education Assistance Authority 2011-1.
Key Rating Drivers
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.
Rating Watch Maintained: On Oct. 16, Fitch placed 766 'AAAsf' rated tranches of U.S. FFELP student loan ABS on Rating Watch Negative following the revision of the U.S. sovereign rating on Oct. 15. For further details, see the press release dated Oct. 16, 2013, 'Fitch Places 'AAAsf' Rated U.S. FFELP Student Loan Tranches on Rating Watch Negative'.
Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of September 2013, total parity is 107.81% (7.25% CE). Cash can be released from the trust given that all of the notes are paid in full.
Adequate Liquidity Support: Liquidity support is provided by a reserve account (sized at the greater of 0.25% of the pool balance and $470,507).
Acceptable Servicing Capabilities: College Foundation, Inc., as servicer, and Nelnet Servicing, LLC as subservicer are responsible for servicing the trust. Fitch views both College Foundation and Nelnet as acceptable servicers of FFELP student loans.
Rating Sensitivities
Since FFELP student loan ABS rely 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 and basis risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults and basis shock beyond Fitch's published stresses could result in future downgrades. Likewise, a buildup of credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.
Fitch has taken the following rating action:
State of North Carolina State Education Assistance Authority 2011-1:
--Class A-1 note Rating Watch Negative maintained;
--Class A-2 note Rating Watch Negative maintained;
--Class A-3 note Rating Watch Negative maintained.
A comparison of the transaction's representations, warranties, and enforcement mechanisms (RW&Es) to those of typical RW&Es for FFELP asset-backed securities is available in the presale appendix. This presale appendix and Fitch's special report on 'Representations, Warranties, and Enforcement Mechanisms on Global Structured Finance Transactions,' may be accessed via the links provided below.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' dated May 24, 2013;
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated May 17, 2013;
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions - Amended' dated April 17, 2012.
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676496
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=811842
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