NEW YORK--(BUSINESS WIRE)--Fitch Ratings maintains the Negative Rating Watch on the senior notes currently rated 'AAAsf', and upgrades the subordinate note from 'Asf' to 'A+sf', issued by Collegiate Funding Services Education Loan Trust Series 2005-A and 2005-B. The Rating Outlook for the the subordinate note is Stable. The upgrade is driven by the credit enhancement that is sufficient at the raised rating.
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: All existing and new issuances of 'AAA' rated tranches of FFELP securitizations are on Rating Watch Negative following the revision of the long-term foreign and local currency Issuer Default Ratings (IDRs) of the U.S.
Sufficient Credit Enhancement: While both the senior and subordinate notes will benefit from overcollateralization (OC; the excess of trust's asset balance over bond balance) and future excess spread, the senior notes also benefit from subordination provided by the class B notes. As of December 2013, total senior parity is for the senior notes issued from series 2005-A and 2005-B is 107.28% and 106.05%, respectively. Total parity for each trust is at its cash release level of 100.50% and as such cash is being released from the trust.
Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.50% of the outstanding loan balance and $1.3 million for series 2005-A. The reserve is sized equal to the greater of 0.50% of the outstanding loan balance and $1.9 million for series 2005-B.
Acceptable Servicing Capabilities: Xerox Education Services, LLC, doing business as ACS Education Services ("ACS") is responsible for servicing the trust. Fitch believes ACS is an acceptable servicer 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 actions:
Collegiate Funding Services Ed Loan Trust, Series 2005-A:
--Class A-2 at 'AAAsf'; Rating Watch Negative Maintained;
--Class A-3 at 'AAAsf'; Rating Watch Negative Maintained;
--Class A-4 at 'AAAsf'; Rating Watch Negative Maintained;
--Class B upgraded to 'A+sf' from 'Asf'; Outlook Stable.
Collegiate Funding Services Ed Loan Trust, Series 2005-B:
--Class A-2 at 'AAAsf'; Rating Watch Negative Maintained;
--Class A-3 at 'AAAsf'; Rating Watch Negative Maintained;
--Class A-4 at 'AAAsf'; Rating Watch Negative Maintained;
--Class B upgraded to 'A+sf' from 'Asf'; Outlook Stable.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (May 17, 2013).
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 - Effective Apr. 7, 2011 to Apr. 3, 2012
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=616766
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=816652
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