NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the senior and subordinate notes issued by EduCap-Trust Indenture dated June 1, 2004 at 'AAA' and 'A'. The rating for the subordinate note is removed from Rating Watch Negative and assigned a Stable Outlook. The Rating Outlook for the senior note remains Negative. A full ratings list is shown below.
The rating on the senior note is affirmed based on the sufficient level of credit enhancement (consisting of subordination, overcollateralization and the projected minimum excess spread) to cover the applicable basis factor stress. The Negative Outlook is maintained due to Fitch's rating revisions on Dec. 2, 2011. Fitch revised the Rating Outlook of 1,134 ratings of U.S. FFELP student loan ABS tranches to Negative due to their reliance on the guaranty of the U.S. On Nov. 28, 2011, Fitch's Sovereign Group affirmed the U.S.'s rating at 'AAA' and revised its Outlook to Negative.
The Stable Outlook is assigned to the subordinate note because total parity has built up to 100%. As noted in Fitch's previous comment on the trust, dated Sept. 29, 2010, and available at 'www.fitchratings.com', if total parity does not reach 100% before the senior note is paid off, Fitch expects to downgrade the subordinate note below investment grade. At that point, it would be difficult for parity to build up given the limited expected excess spread due to the high coupon on the subordinate note. As a result, EduCap Inc. decided to inject cash into the trust on Feb. 8 in order to build parity up to 100% and thus Fitch is able to affirm the rating at 'A'.
Fitch has taken the following rating actions:
EduCap-Trust Indenture dated June 1, 2004:
--Series A-3 affirmed at 'AAAsf'; Outlook Negative;
--Series B affirmed at 'Asf'; removed from Rating Watch Negative and assigned a Stable Outlook.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' dated Aug. 4, 2011;
--'U.S.FFELP Student Loan ABS Rating Criteria' dated May 10, 2011;
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS' dated April 7, 2011.
Applicable Criteria and Related Research:
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=616766
U.S. FFELP Student Loan ABS Surveillance Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=597566
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569
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