Fitch Takes Various Rating Actions on Educational Loan Company Trust I

NEW YORK--()--Fitch Ratings downgrades the senior student loan notes to 'Asf' from 'AAAsf' and affirms the subordinate student loan note at 'CCCsf' issued by Educational Loan Company Trust I Series 2006-1. The Rating Outlook on the senior notes is revised from Stable to Negative. Fitch used its 'Global Structured Finance Rating Criteria' and 'U.S. FFFELP Student Loan ABS Criteria' to review the transaction. A full list of ratings actions follows at the end of this press release.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral comprises Federal Family Education Loan Program (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.

Credit Enhancement: CE is provided by excess spread, and the senior notes benefit from subordination provided by junior bonds. As of March 2014, reported senior parity is 107.88%, while total parity remains below par at 97.46%. The trust is comprised of 100% auction rate securities which are paying the maximum auction rates. Despite the healthy parity for the senior notes, Fitch analysis shows they won't be able to pass Fitch's higher rating stresses in interest up environment. The under-collateralization and bond interest payment structure will cause the trust to generate negative excess spread in a higher interest rate environment, thus eroding principal.

Liquidity Support: Liquidity support is provided by a reserve fund currently sized at $2,079,000 (1% of the bond balance, with a floor of $750,000).

Acceptable Servicing Capabilities: Day-to-day servicing is provided by ACS and Great Lakes. Both servicers have demonstrated adequate servicing capabilities.

The RE for the subordinate note was calculated to be approximately 40.00% given Fitch's calculation of expected net recoveries and principal balance of the note as of the latest reporting period.

RATING SENSITIVITIES

Since FFELP student loan ABS rely on the U.S. government to reimburse defaults, 'AAA'sf 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:

Educational Loan Company Trust I Series 2006-1:

--Class A-1 downgraded to 'Asf' from 'AAAsf'; Outlook Negative;

--Class A-2 downgraded to 'Asf' from 'AAAsf'; Outlook Negative;

--Class A-3 downgraded to 'Asf' from 'AAAsf'; Outlook Negative;

--Class B affirmed at 'CCCsf'; RE 40%.

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

Applicable Criteria and Related Research:

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

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

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

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

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

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.

Contacts

Fitch Ratings
Primary Analyst
Victoria Ohorodnyk
Associate Director
+1 212-908-0866
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1 212-908-9171
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Victoria Ohorodnyk
Associate Director
+1 212-908-0866
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1 212-908-9171
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com