NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the ratings of the student loan revenue bonds issued by the New Jersey Higher Education Student Assistance Authority (NJHESAA) under the 1998 Indenture of Trust at 'BBBsf'. The Outlook remains Negative.
A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
Collateral Quality: The trust is collateralized by approximately $94 million of private student loans as of March 2014. The loans were originated by NHESAA. Based upon the trust's performance, the projected remaining gross defaults are expected to be in the range of 9%-11% as of the current student loan principal balance. A recovery rate of 60% was applied, which was determined to be appropriate based on the latest data provided by the issuer.
Negative Outlook: The Negative Outlook is maintained due to the interest rate risk embedded in the tax-exempt auction rate securities which makes up 100% of the outstanding bonds. Despite the SWAPS in place, the trust is still exposed to high interest rate risk, since they are receiving SIFMA, whereas all the bonds interests are currently paying the maximum rate of 2x SIFMA. The trust also does not benefit from a net loan rate and as such interest rates can increase to a maximum rate of either 12% or 14%, depending on the bond.
Credit Enhancement (CE): CE is provided by overcollateralization and excess spread. As of the March 2014 servicer report, the senior parity ratio has increased since the last review from 109.49% to 112.36% (March 31, 2013 - 2014). Liquidity for the trust is provided by a debt service reserve fund of $2,540,500, which represents approximately 2.5% of the current total outstanding bond balance. In addition, the trust cannot release any excess cash until the trust parity reaches the release level threshold of 120%.
Servicing Capabilities: Day-to-day servicing is provided by NJHESAA. Fitch believes the servicing operations are acceptable at this time.
RATING SENSITIVITIES
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 bonds and may make certain bond ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage. Fitch will continue to monitor the performance of the trust.
Fitch has affirmed the following Higher Education Student Assistance Authority of the State of New Jersey (NJHESAA), Student Loan Revenue Bonds, 1998 Indenture of Trust ratings, and maintains the Negative Rating Outlook:
New Jersey Higher Education Student Assistance Authority 1998 Indenture of Trust
--Series 2002-A at 'BBBsf';
--Series 2002-C at 'BBBsf';
--Series 2002-D at 'BBBsf';
--Series 2003-A at 'BBBsf';
--Series 2003-C at 'BBBsf';
--Series 2003-D at 'BBBsf';
--Series 2004-A at 'BBBsf';
--Series 2004-D at 'BBBsf';
--Series 2005-A at 'BBBsf';
--Series 2005-B at 'BBBsf';
--Series 2005-C at 'BBBsf';
--Series 2005-D at 'BBBsf';
--Series 2006-A at 'BBBsf';
--Series 2006-B at 'BBBsf';
--Series 2006-D at 'BBBsf';
--Series 2007-B at 'BBBsf';
--Series 2007-D at 'BBBsf'.
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 20, 2014.
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821
U.S. Private Student Loan ABS Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=730956
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=833240
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