News Column

Fitch Downgrades & Withdraws the Sub Note of National Ed Financing LLC Series 2008-A

July 30, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings downgrades the subordinate note from 'BBsf' to 'B-sf' issued by National Ed Financing LLC and subsequently withdraws the rating for coverage reasons. National Ed Financing has chosen to stop participating in the rating process. Accordingly, Fitch will no longer provide ratings or analytical coverage for National Ed Financing.

KEY RATING DRIVERS

Collateral Quality: The loans under the facility are comprised of 88% of Federal Family Education Loan Program (FFELP) loans and approximately 12% private student loans. The FFELP collateral benefits from 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) for the FFELP loans, which make up the majority of the portfolio. The projected lifetime defaults for the private student loans are expected to range between 30%-40%. A recovery rate of 14% was applied.

Credit Enhancement: The rating on the subordinate note is downgraded due to the insufficient credit enhancements to cover the applicable risk factor stresses. In addition, the trust has not been able to build up parity since the deal's inception. As of May 2014, total parity is 98.00%. The parity stagnation is due to the high expense structure and rich borrower benefits, which has contributed to a lower interest margin. The trust is a full turbo structure; therefore no cash is released until the notes are paid in full.

Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to 0.50% of the total note balance.

Servicing Capabilities: National Education is the Master Servicer and will be responsible for servicing approximately 90% of the FFELP collateral pool and 100% of the private student loan collateral pool. The remaining 10% of FFELP collateral is serviced by ACS, COSTEP, ESA, Great Lakes (GLHEC), Nelnet, AES/PHEAA, Ed Financial and Navient Solutions. Fitch has reviewed the servicing operations of the above entities and believes them to be acceptable servicers of FFELP and private 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. As Fitch's base case private loans 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 credit enhancement 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 has taken the following rating action:

National Ed Financing LLC - Series 2008-A

--Class B downgraded to 'B-sf' from 'BBsf'; subsequently withdrawn

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (June 23, 2014).

--'U.S. Private Student Loan ABS Criteria' (Jan 29, 2014).

Applicable Criteria and Related Research:

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=750530

Global Structured Finance Rating Criteria

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=842941

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

Paul Jiang

Analyst

+1-212-908-9120

Fitch Ratings, Inc.

33 Whitehall St.

New York, NY 10004

or

Committee Chairperson

Tracy Wan

Senior Director

+1-212-908-9171

or

Media Relations

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com


Source: Fitch Ratings


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