NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the senior student loan notes at 'AAAsf' and the subordinate student loan notes at 'AAsf' issued by Higher Education Funding I - Amended and Restated 2005 Indenture of Trust (2004). The Rating Outlook on the notes, which is tied to the sovereign rating of the U.S. government, is Stable.
Key Rating Drivers
High Collateral Quality: The trust collateral consists of 100% Federal Family Education Loan Program (FFELP) loans including 9% of rehabilitated (rehab) 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 at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED). Fitch affirmed at 'AAA' and assigned a Stable Outlook to the U.S. sovereign rating on March 24, 2014.
Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of the March 2014 servicer report, total parity is 101.18% and senior parity is 106.35%. Additionally, the class A notes benefit from 4.35% in subordination provided by the class B notes.
Adequate Liquidity Support: Subsequent to the 2014-1 issuance, liquidity support is initially provided by a $7,702,125 reserve account (0.75% of outstanding note balance with a floor of $2 million). Additionally, there is a $1.2 million Cap I account, scheduled to be release on May 25, 2015.
Acceptable Servicing Capabilities: Day-to-day servicing will be provided by AES and ACS. Both servicers have demonstrated adequate servicing capabilities.
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 affirmed Higher Education Funding I - Amended and Restated 2005 Indenture of Trust (2004) as follows:
--2004-1 A-1 at 'AAAsf'; Outlook Stable;
--2004-1 A-2 at 'AAAsf'; Outlook Stable;
--2004-1 A-3 at 'AAAsf'; Outlook Stable;
--2004-1 A-4 at 'AAAsf'; Outlook Stable;
--2004-1 A-5 at 'AAAsf'; Outlook Stable;
--2004-1 A-6 at 'AAAsf'; Outlook Stable;
--2004-1 A-9 at 'AAAsf'; Outlook Stable;
--2004-1 A-10 at 'AAAsf'; Outlook Stable;
--2004-1 A-12 at 'AAAsf'; Outlook Stable;
--2004-1 A-13 at 'AAAsf'; Outlook Stable;
--2004-1 A-14 at 'AAAsf'; Outlook Stable;
--2004-1 A-15 at 'AAAsf'; Outlook Stable;
--2005-1 A-2 at 'AAAsf'; Outlook Stable;
--2005-1 A-3 at 'AAAsf'; Outlook Stable;
--2005-1 A-4 at 'AAAsf'; Outlook Stable;
--2005-1 A-5 at 'AAAsf'; Outlook Stable;
--2004-1 B-1 at 'AAsf'; Outlook Stable;
--2004-1 B-2 at 'AAsf'; Outlook Stable.
Additional information is available at 'www.fitchratings.com'
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' dated May 20, 2014;
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated May 17, 2014.
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=830974
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