Fitch Maintains Rating Watch on Two Brazos Student Loan Trusts

NEW YORK--()--Fitch Ratings maintains the Negative Rating Watch on the senior bonds currently rated 'AAAsf' issued by both Brazos Student Finance Corporation 2010-1 (BSFC 2010-1) and Brazos Higher Education Authority 2011-1 (BHEA 2011-1) student loan trusts.

The senior notes for BSFC 2010-1 and BHEA 2011-1 are currently rated at 'AAAsf' and the Rating Watch Negative is maintained due to the current rating action taken on the U.S. sovereign rating.

Key Rating Drivers

High Collateral Quality: Both trusts' collateral consists of 100% FFELP 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.

Rating Watch Maintained: On Oct. 16, Fitch placed 766 'AAAsf' rated tranches of U.S. FFELP student loan ABS on Rating Watch Negative following the revision of the U.S. sovereign rating on Oct. 15. For further details, see the press release dated Oct. 16, 2013, 'Fitch Places 'AAAsf' Rated U.S. FFELP Student Loan Tranches on Rating Watch Negative'.

Sufficient Credit Enhancement (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. For BSCF 2010-1, the trust has reached its specified OC amount of 10% and current parity is 110.82% as of August 2013. For BHEA 2011-1, the current senior parity is 107.27%, and total CE is about 6.78% as of October 2013. The BHEA 2011-1 trust is a turbo structure; therefore, no cash is released until the notes are paid in full.

Adequate Liquidity Support: Liquidity support is provided by a reserve account for BSFC 2010-1 sized at $500,000; and for the BHEA 2011-1 trust, the reserve account is equal to the greater of 0.25% of the pool balance and $2,427,000 (0.15% of the initial pool balance).

Satisfactory Servicing Capabilities: Brazos Higher Education Services Corporation is the master servicer for both trusts. Sallie Mae Inc. services 81.71% of BSFC 2010-1 and 22.64% of the BHEA 2011-1 portfolio; AES, a subsidiary of the Pennsylvania Higher Education Assistance Agency, services 17.63% of BSFC 2010-1 and 59.91% of the BHEA 2011 portfolio; ACS Education Services, a subsidiary of the Xerox Corporation, services 0.02% of the BSFC 2010-1 and 3.37% of the BHEA 2011-1 portfolio; Great Lakes Educational Loan Services services 0.64% of BSFC 2010-1 and 0.36% of the BHEA 2011-1 portfolio; and Brazos Loan Services (BLS) services 13.72% of the BSFC 2011-1 trust only . Fitch believes the subservicers of the BSFC 2010-1 and BHEA 2011-1 trusts are satisfactory 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:

Brazos Student Finance Corporation 2010-1:

-- Class A-1 Rating Watch Negative maintained.

Brazos Higher Education Authority 2011-1:

-- Class A-1 Rating Watch Negative maintained;

-- Class A-2 Rating Watch Negative maintained;

-- Class A-3 Rating Watch Negative maintained.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' dated May 24, 2013;

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated May 17, 2013.

Applicable Criteria and Related Research:

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

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

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=812131

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Jeffrey Prackup, +1-212-908-0839
Director
Fitch Ratings, Inc.
One State Street Plaza
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

Sharing

Contacts

Fitch Ratings, Inc.
Primary Analyst
Jeffrey Prackup, +1-212-908-0839
Director
Fitch Ratings, Inc.
One State Street Plaza
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