News Column

Fitch Upgrades Sub Notes for Iowa Student Loan Liquidity Corp. 2012-1

May 30, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the Iowa Student Loan Liquidity Corporation's (ISL) series 2012-1 senior notes at 'AAAsf' and upgrades the subordinate notes to 'AAsf' from 'Asf' . The Rating Outlook remains Stable for both notes.

KEY RATING DRIVERS

High Collateral Quality:

The collateral consists of 100% of Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high and 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.

Stable Outlook:

Fitch affirmed and removed from Rating Watch Negative the 'AAAsf' rated tranches of U.S. FFELP student loan ABS to reflect the revision of the U.S. sovereign rating on March 24, 2014. Fitch also assigned Stable Outlooks to these tranches following the Rating Watch removal.

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 excess spread, the senior notes also benefit from subordination provided by the class B note. As of March 2014, total parity is 101.95% (1.92% CE) and senior parity is 104.41% (4.22% CE). The upgrade of the subordinate notes is due to the sufficient credit enhancement necessary to support an 'AAsf' rating. Cash cannot be released from the trust until the senior class A notes and the subordinate class B notes have been paid in full.

Adequate Liquidity Support:

Liquidity support is provided by a Debt Service Reserve Fund sized at the greater of 0.25% of the pool balance and 0.15% of the initial pool balance.

Acceptable Servicing Capabilities:

Aspire Resources, Inc., a wholly-owned subsidiary and servicing division of ISL is responsible for day-to-day servicing of the trust. Pennsylvania Higher Education Assistance Agency (PHEAA) will act as backup servicer for the trust. Although Aspire Resources, Inc. and PHEAA are not rated by Fitch, Fitch believes they are 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.

Fitch has taken the following rating actions:

Iowa Student Loan Liquidity Corporation, series 2012-1:

--Class A notes affirmed at 'AAAsf'; Outlook Stable.

--Class B notes upgraded to 'AAsf' from 'Asf'; Outlook Stable.

A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for student loans is available by accessing the reports and links below:

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;

--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended' (May 11, 2012).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

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

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

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

Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676496

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=832368

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

Jeffrey Prackup

Director

+1-212-908-0839

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Paul Jiang

Analyst

+1-212-908-9120

or

Committee Chairperson

Steven Stubbs

Senior Director

+1-212-908-0676

or

Media Relations

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com




Source: Fitch Ratings


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