NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the senior notes issued from SLM Student Loan Trust 2012-8 (SLM 2012-8) and upgrades the SLM 2012-8 subordinate notes. The Rating Outlook on all outstanding notes remains Stable. The upgrade is driven by stable collateral performance, hence better coverage for the subordinate notes.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% of Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch currently rates the U.S. sovereign rating at 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of September 2014, total parity is 104.43% and senior parity is 108.04%. Cash is not being released as the trust has not yet reached the target OC release level of the greater of 4.5% of the adjusted pool balance and $15,000,000.
Adequate Liquidity Support: Liquidity support is provided by a reserve account and a capitalized interest account. The reserve is sized equal to the greater of 0.25% of the pool balance, and $2,235,626. The current balance of the capitalized interest account is approximately $3.26 million.
Acceptable Servicing Capabilities: Navient Solutions Inc., as servicer, and PHEAA as sub-servicer are responsible for servicing the trust. Fitch views both Navient Solutions Inc. and PHEAA as acceptable servicers of FFELP student loans.
RATING SENSITIVITIES
Since FFELP student loan ABS relies 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:
SLM Student Loan Trust 2012-8
--Class A notes affirmed at 'AAAsf'; Outlook Stable;
--Class B note upgraded to 'AAsf' from 'A+sf'; Outlook Stable.
A comparison of the transaction's representations, warranties, and enforcement mechanisms (RW&Es) to those of typical RW&Es for FFELP asset-backed securities is available in the presale appendix. This presale appendix and Fitch's special report on 'Representations, Warranties, and Enforcement Mechanisms on Global Structured Finance Transactions,' may be accessed via the links provided below.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' dated May 20, 2014;
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated June 23, 2014;
--'SLM Student Loan Trust 2012-8 - Appendix' dated Nov. 26, 2012;
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated Oct. 31, 2014.
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=935896
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