News Column

Fitch Affirms Senior, Sub Notes for Education Funding Capital Trust -IV; Outlook Stable

June 13, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the senior and subordinate notes issued from Education Funding Capital Trust - IV and maintains the Stable Outlook.

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, in Fitch's opinion, 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. Fitch maintains the U.S. sovereign rating at 'AAA' with a Stable Outlook.

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 April 2014 distribution month, total parity is 100.55% and senior parity is 112.59%.

Adequate Liquidity Support:

Liquidity support for the notes is provided by a reserve account which is currently at $3.5 million.

Acceptable Servicing Capabilities:

PHEAA, as servicer and Xerox Education Services as subservicer are responsible for servicing the trust. Fitch has reviewed the servicing operations of PHEAA and Xerox Education Services and 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;

Education Lending Capital Trust - IV

--Class A-2 notes affirmed at 'AAAsf'; Outlook Stable;

--Class A-3 notes affirmed at 'AAAsf'; Outlook Stable;

--Class A-4 notes affirmed at 'AAAsf'; Outlook Stable;

--Class A-5 notes affirmed at 'AAAsf'; Outlook Stable;

--Class A-6 notes affirmed at 'AAAsf'; Outlook Stable;

--Class B-1 notes affirmed at 'Asf'; Outlook Stable.

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

A comparison of the transaction's RW&E to those of typical RW&E for student loans is available by accessing the reports below.

Applicable Criteria and Related Research:

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

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (May 2014).

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=834605

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, Inc.

Primary Analyst

Autumn Mascio, +1-212-908-0896

Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Committee Chairperson

Tracy Wan, +1-212-908-9171

Senior Director

or

Media Relations

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


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