News Column

Fitch Rates Kentucky Higher Education Student Loan Corp. Sr Series 2014A

May 21, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns ratings to Kentucky Higher Education Student Loan Corporation Senior Series 2014A student loan revenue bonds as follows:

--$850,000 A2016 'Asf'; Outlook Stable;

--$900,000 A2017 'Asf'; Outlook Stable;

--$1,200,000 A2018 'Asf'; Outlook Stable;

--$1,200,000 A2019 'Asf'; Outlook Stable;

--$1,200,000 A2020 'Asf'; Outlook Stable;

--$1,000,000 A2021 'Asf'; Outlook Stable;

--$1,000,000 A2022 'Asf'; Outlook Stable;

--$1,000,000 A2023 'Asf'; Outlook Stable;

--$1,500,000 A2024 'Asf'; Outlook Stable;

--$7,000,000 A2026 'Asf'; Outlook Stable;

--$2,800,000 A2028 'Asf'; Outlook Stable;

--$2,000,000 A2031 'Asf'; Outlook Stable;

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 May 10, 2016. The private student loans are credit tested and have been or will be originated under the Advantage Loan Program as described in Appendix A of the presale report. The FFELP loans includes approximately 40% of rehab loans, with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest.

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 Dec. 1, 2026.

Adequate Liquidity Support: Liquidity support for the senior series 2014A notes is provided by a $0.649 million reserve fund (3.0% of the initial note balance) and a $0.40 million loan reserve fund.

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.

RATING SENSITIVITY

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 May 1, 2014.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May, 2014);

--'U.S. Private Student Loan ABS Criteria' (Jan. 2014);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS' (May 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

U.S. Private Student Loan ABS Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=730956

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=831202

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

Nicole Edwards, +1-212-908-9114

Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Harry Kohl, +1-212-908-0837

Associate Director

or

Committee Chairperson

Steven Stubbs, +1-212-908-0676

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






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters