News Column

Fitch Maintains Negative Watch on SLM Student Loan Trust 2005-9 & 2006-10 Sr. Notes; Upgrades Subs

January 21, 2014

Fitch Ratings maintains the Rating Watch Negative on the senior notes and upgrades the subordinate notes issued by SLM Student Loan Trust 2005-9 and SLM Student Loan Trust 2006-10. The Rating Outlook remains Stable for the subordinate notes. KEY RATING DRIVERS High Collateral Quality: The trust collateral is comprised of 100 percent of Federal Family Education Loan Program (FFELP) loans with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97 percent of principal and accrued interest. Rating Watch Negative: 'AAAsf' rated tranches of U.S. FFELP student loan ABS are maintained on Rating Watch Negative following the revision of the U.S. sovereign rating on Oct. 15, 2013 . Sufficient Credit Enhancement: Credit Enhancement is provided by overcollateralization, excess spread and for the class A notes, subordination provided by the class B notes. As of the September 2013 distribution date, total parity is 100 percent and senior parity is 104.68 percent for SLM Student Loan Trust 2005-9 and total parity is 100 percent and senior parity is 105.06 percent for SLM Student Loan Trust 2006-10. Cash is being released from the trust given the trust has reached its release level threshold of 100 percent parity. Adequate Liquidity Support: Liquidity support is provided by a reserve account where the balance is determined as the greater of 0.25 percent of the pool balance and $4,531,704 for SLM Student Loan Trust 2005-9 and $6,034,845 for SLM Student Loan Trust 2006-10. Acceptable Servicing Capabilities: Sallie Mae Inc. , as the servicer, is responsible for the day-to- day servicing of this trust. In Fitch's opinion, Sallie Mae is an acceptable servicer of FFELP student loans. RATING SENSITIVITIES Since the FFELP student loan ABS relies on the U.S. government to reimburse defaults, 'AAA'sf 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: SLM Student Loan Trust 2005-9: --Class A-4 note at 'AAAsf'; Rating Watch Negative maintained; --Class A-5 note at 'AAAsf'; Rating Watch Negative maintained; --Class A-6 note at 'AAAsf'; Rating Watch Negative maintained; --Class A-7A note at 'AAAsf'; Rating Watch Negative maintained; --Class A-7B note at 'AAAsf'; Rating Watch Negative maintained; --Class B upgraded to 'Asf' from 'BBB-sf'; Outlook Stable. SLM Student Loan Trust 2006-10: --Class A-4 note at 'AAAsf'; Rating Watch Negative maintained; --Class A-5A note at 'AAAsf'; Rating Watch Negative maintained; --Class A-5B note at 'AAAsf'; Rating Watch Negative maintained; --Class A-6 note at 'AAAsf'; Rating Watch Negative maintained; --Class B upgraded to 'Asf' from 'BBBsf'; Outlook Stable. Additional information is available at 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://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=708661 Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=708795 Additional Disclosure Solicitation Status http://fitchratings.com/gws/en/disclosure/ solicitation?pr_id=815171 ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Manufacturing Close - Up


Story Tools