News Column

Fitch Rates Edsouth Indenture No. 5, LLC, Series 2014-1 (EDUSA 2014-1)

February 4, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings for two classes of EDUSA 2014-1 notes issued by Edsouth Indenture No. 5, LLC, pursuant to a discrete indenture dated Jan. 15, 2014:

--$197,000,000 floating rate class A notes 'AAAsf'; Rating Watch Negative;

--$4,000,000 fixed rate class B notes 'Asf'; Outlook Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised entirely of student loans originated under Federal Family Education Loan Program (FFELP). Although the trust consists of approximately 100% of Rehabilitated 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 at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED).

Rating Watch Negative Assigned: 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 (CE): Credit enhancement is provided by approximately $3,546,573 of overcollateralization (OC) and excess spread. At closing, a senior parity of 103.83% and total parity of 101.76% is expected. Cash may be released to the issuer when the Target OC, equal to the greater of 2.25% of the adjusted pool balance or $3,500,000, has been reached. Fitch reviewed transaction cash flows that were stressed at a level commensurate with Fitch's 'AAAsf' rating categories for the senior notes and 'Asf' for the subordinate notes. The cash flow results were satisfactory under corresponding stress scenarios for the senior and subordinate classes of notes.

Adequate Liquidity Support: Liquidity support for the EDUSA 2014-1 notes is provided by a $4.5 million capitalized interest fund and a $502,500 reserve fund, with a debt service reserve fund requirement equal to the greater of 0.25% of the aggregate outstanding note balance and 0.10% of the initial aggregate note balance, each funded at closing with note proceeds. The capitalized interest fund balance will step down to $3 million on the January 2015 distribution date and any remaining funds will be disbursed as available funds on the January 2016 distribution date.

Acceptable Servicing Capabilities: Educational Services of America, Inc. (EdsouthServices) will be the master servicer. Pennsylvania Higher Education Assistance Agency (PHEAA; 46.4%), Great Lakes Education Loan Services, Inc. (GLELSI; 41%) and Georgia Student Finance Authority (Georgia; 12.6%) are the servicers. PHEAA will also be back-up servicer for Georgia. Fitch has reviewed the servicing operations of each servicer and believes them to be 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.

Key Rating Drivers and Rating Sensitivities are further described in the pre-sale report titled 'Edsouth Indenture No. 5 LLC, Series 2014-1', dated Jan. 29, 2014, available on www.fitchratings.com.

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);

--'Edsouth Indenture No. 5, LLC, Series 2014-1' (Jan. 29, 2014).

Applicable Criteria and Related Research:

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

Edsouth Indenture No. 5, LLC, Series 2014-1 (US ABS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732565

Edsouth Indenture No. 5, LLC, Series 2014-1 -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732955

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=819489

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Emily Lee, +1-212-908-0667

Director

Fitch Ratings, Inc.

One State Street Plaza

New York, NY 10004

or

Secondary Analyst

Charlene Davis, +1-212-908-0213

Associate Director

or

Committee Chairperson

Tracy Wan, +1-212-908-9171

Senior Director

or

Media Relations

Sandro Scenga, New York, +1-212-908-0278

sandro.scenga@fitchratings.com


Source: Fitch Ratings


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



Source: Business Wire


Story Tools