KEY RATING DRIVERS
Adequate Collateral Quality: The senior series 2014A master trust will be collateralized by consolidation loans originated under the Federal Family Education Loan Program (FFELP) and existing and new fixed-rate private student loans to be originated from deal closing to
Sufficient Credit Enhancement: Transaction cash flows were satisfactory under all stressed scenarios at Fitch's 'A' rating category. CE is provided by overcollateralization (OC; the excess of the trust's asset balance over bond balance) and excess spread. The parity ratio (total assets to total liabilities) is expected to be 135.65% (including the premium bonds) at closing. Cash will be released to the issuer when the total parity reaches 140% until
Adequate Liquidity Support: Liquidity support for the senior series 2014A notes is provided by a
Acceptable Servicing Capabilities: KHESLC will service the entire senior series 2014A portfolio. KHESLC's default collection experience for private student loans is limited given that the Advantage Loan Program was initiated in 2010 and currently there are minimal defaults; but as a not for profit quasi state agency KHESLC has more collection tools at its disposal than for-profit issuers (see Appendix C). Fitch believes KHESLC is an acceptable servicer for the portfolio.
As Fitch's base case default proxy is derived primarily from historical collateral performance, actual performance may differ from the expected performance, resulting in higher loss levels than the base case. This will result in a decline in CE and remaining loss coverage levels available to the notes and may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
Fitch evaluated the sensitivity of the ratings assigned to KHESLC Senior Series 2014A to increased defaults, reduced recoveries and excess spread over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to the above factors, showing a potential downgrade to 'BBB-'. For further discussion of our sensitivity analysis and Fitch's stress analysis please see the presale titled 'Kentucky Higher Education Student Loan Corporation Senior Series 2014A, dated
Additional information is available at 'www.fitchratings.com'.
--'Global Structured Finance Rating Criteria' (May, 2014);
--'U.S. Private Student Loan ABS Criteria' (
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS' (
Global Structured Finance Rating Criteria
U.S. Private Student Loan ABS Criteria
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria
Source: Fitch Ratings
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