NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings for the Student Loan Corporation (SLC) Private Student Loan Trust Series 2006-A notes issued by SLC. The Rating Outlook for the senior class A and subordinate class B notes have been revised to Outlook Stable from Negative. The Negative Outlook for the junior subordinate class C notes has been maintained. A detailed list of rating actions follows at the end of this press release.
Fitch's Global Structured Finance Rating Criteria and Private Student Loan Asset-Backed Securities (ABS) Criteria were used to review the transaction.
SLC's 2006-A trust collateral consists of $1.096 billion of private student loans originated under Citibank's CitiAssist private student loan program and underwritten to specific guidelines. As of the December 2013 distribution date, the cumulative defaults are approximately 7% of the initial pool balance. Given a pool factor of approximately 35% the projected lifetime default ranges between 9% and 11% with remaining defaults ranging between 6% and 9%.
The trust possesses third party insurance policies which are deemed to provide limited credit enhancement for the notes. New Hampshire Insurance Company insures 55% of the portfolio and is rated A/Stable by Fitch. Royal & Sun Alliance USA insures 40% of the portfolio and is rated A-/Rating Watch Negative by Fitch. The remaining 5% of the portfolio is uninsured. The student loans are insured between 80% and 95% of the principal balance for each loan which has enhanced the recovery on defaulted loans.
Credit Enhancement (CE)
CE is provided by overcollateralization (OC); the excess of the trust's asset balance over the bond balance) and excess spread. Although the total parity ratio (total assets over total liabilities) has been increasing and is currently 101.42% as of December 2013, Fitch only gives credit to the 101.0% parity cash release level. The senior notes also benefit from the subordination of the Class B and Class C notes. Senior parity has been rising and is 148.33%, and the subordinate parity has risen as well to 126.02%.
The SLC 2006-A trust's credit enhancement levels are sufficient to maintain the current ratings on the notes and revise the outlook to Stable from Negative on the senior class A notes and subordinate class B notes. The junior subordinate class C notes Outlook was maintained at Negative due to continual deterioration in the collateral performance and limited hard OC protection given the cash release.
Liquidity support will be provided by a debt service reserve fund which is equal to the greater of 0.25% of the original pool balance and 1.00% of the pool balance of the last day of related collection period.
SLC / Discover Bank, rated BBB/F2 Stable, is the master servicer and administrator of the trust, and the subservicer, Discover Products Inc., is a wholly owned subsidiary of Discover Bank. Fitch believes the servicing operations of Discover Products Inc. to be acceptable at this time.
As Fitch's base case 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 CE 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 affirms and revises the Outlook for the following notes:
SLC Private Student Loan Trust 2006-A
--Senior Class A-4 at 'AAAsf'; Outlook to Stable from Negative;
--Senior Class A-5 at 'AAAsf'; Outlook to Stable from Negative;
--Subordinate Class B at 'AAsf'; Outlook to Stable from Negative;
--Junior Subordinate Class C at 'Asf'; Outlook Negative maintained.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'U.S. Private Student Loan ABS Criteria' (Jan. 29, 2014);
--'Global Structured Finance Rating Criteria' (May 24, 2013).
Applicable Criteria and Related Research:
U.S. Private Student Loan ABS Criteria
Global Structured Finance Rating Criteria