Fitch to Rate Vermont Student Assistance Corp, Series 2014-B; Presale Issued

NEW YORK--()--Fitch Ratings expects to rate Vermont Student Assistance Corporation, education loan revenue bonds, series 2014-B (tax-exempt fixed-rate bonds) as follows:

--$59,700,000 series 2014B 'Asf(exp)'; Outlook Stable.

Key Rating Drivers

High Collateral Quality: The trust will be collateralized by approximately $28 million of private and $38 million of Federal Family Education Loan Program (FFELP) student loans. The private student loans were originated according to the underwriting criteria for the VSAC Private Loan Programs. The FFELP loans are guaranty by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest.

Sufficient Credit Enhancement (CE): Transaction cash flows were satisfactory under all stressed scenarios at Fitch's 'A' rating category. CE is provided by overcollateralization (OC) and excess spread. The target specified OC amount is defined as the greater of 17.84% of the adjusted pool balance and 10% of the initial pool balance. The total parity ratio is expected to be 117.77% at closing.

Adequate Liquidity Support: Liquidity support for the VSAC 2014-B notes is provided by a $165,413 reserve account (0.25% of initial student loan balance) and is funded at closing. The required reserve account balance for any distribution dates is the greater of 0.25% of the current student loan balance and 0.15% of the initial student loan balance ($99,248).

Satisfactory Servicing Capabilities: Day-to-day servicing will be provided by VSAC. Nelnet Servicing, LLC is the back-up servicer for the FFELP loans. Nelnet Servicing, LLC (d/b/a as Firstmark Services) will be the back-up servicer for the private student loans. Fitch believes the servicing operations to be acceptable.

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 notes and may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.

Fitch evaluated the sensitivity of the ratings assigned to VSAC 2014B to increased defaults, reduced recoveries and excess spread over the life of the transaction. Fitch's analysis found that the transaction displays some sensitivity to the above factors, showing a potential downgrade to 'BB' and 'B'.

For further discussion of Fitch's sensitivity analysis and stress analysis, please see the related presale report 'Vermont Student Assistance Corporation, Series 2014-B', dated Nov. 14, 2014.

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

Relevant Criteria and Related Research:

--'Global Structured Finance Rating Criteria', August, 2014;

--'U.S. Private Student Loan ABS Criteria', January, 2014;

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS', August 2014.

Applicable Criteria and Related Research: Vermont Student Assistance Corporation, Series 2014-B

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=814548

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530

U.S. Private Student Loan ABS Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=730956

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=922955

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Contacts

Fitch Ratings
Primary Analyst
Emily Lee, +1-212-908-0667
Director
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Victoria Ohorodnyk, +1-212-908-0837
Associate Director
or
Committee Chairperson
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations
Sandro Scenga, +1 212-908-0278 (New York)
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Emily Lee, +1-212-908-0667
Director
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Victoria Ohorodnyk, +1-212-908-0837
Associate Director
or
Committee Chairperson
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations
Sandro Scenga, +1 212-908-0278 (New York)
sandro.scenga@fitchratings.com