News Column

Fitch Affirms Ratings on Brazos Student Finance Corp. 2003 Indenture of Trust

August 15, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the ratings on the class A and B notes issued from Brazos Student Finance Corporation pursuant to the 2003 Indenture of Trust (BSFC 2003). The Rating Outlook is maintained at Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised of 82.5% of Federal Family Education Loan Program (FFELP) loans, Health Education Assistance Loan Program (HEAL) loans, and 17.5% private student loans. The FFELP and HEAL loans benefit from 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. Fitch maintains a rating of 'AAA'; Outlook Stable on the United States. The projected remaining defaults as a percent of the current pool balance on the private student loans are expected to range between 7% and 9% using proxy data. A recovery rate of 15% was applied, which was determined to be appropriate based on data provided by the issuer.

Sufficient Credit Enhancement: Credit enhancement (CE) is provided by overcollateralization, excess spread and, for the class A notes, subordination provided by the class B notes. As of the July 2014 distribution date, the senior parity and total parity for BSFC 2003 are 126.17% and 104.55% respectively; however, Fitch only gives credit up to the 109% senior parity and 103% total parity cash release level.

Adequate Liquidity Support: Liquidity support is provided by a reserve account where the balance is determined as the greater 1.00% of the outstanding note balance, or (b) $500,000.

Acceptable Servicing Capabilities: Pennsylvania Higher Education Assistance Agency (PHEAA), Navient Solutions, Inc., Great Lakes Education Loan Services, Inc. and Xerox Education Services, as sub-servicers, are responsible for the day-to-day servicing of this trust. In Fitch's opinion, all sub-servicers are acceptable servicers of FFELP and private student loans.

RATING SENSITIVITIES

Since FFELP student loan asset-backed securities 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 CE driven by positive excess spread given favorable basis factor conditions and better performance from private student loans could lead to future upgrades.

Fitch has taken the following rating actions:

Brazos Student Finance Corp., Student Loan Asset-Backed Notes, 2003 Indenture of Trust:

-- Series 2003 A-3 affirmed at 'AAAsf'; Outlook Stable;

-- Series 2003 A-4 affirmed at 'AAAsf'; Outlook Stable;

-- Series 2003 B-1 affirmed at 'BBBsf'; Outlook Stable.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' dated May 2014;

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated June 2014.

--'U.S. Private Student Loan ABS Criteria' dated January 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=754389

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=852234

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

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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