Fitch Rates Edsouth Indenture No. 8, LLC, Series 2014-4 (EDUSA 2014-4)

NEW YORK--()--Fitch Ratings assigns the following ratings to two classes of EDUSA 2014-4 notes issued by Edsouth Indenture No. 8, LLC, pursuant to a discrete indenture dated Dec. 1, 2014:

--$297,000,000 floating-rate class A notes 'AAAsf'; Outlook Stable;

--$5,800,000 floating-rate class B notes 'Asf'; Outlook Stable.

The subordinate class B notes are subject to an interest cap. Fitch does not rate any amount of the class B carry-over amount.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised entirely of student loans originated under Federal Family Education Loan Program (FFELP). Although the trust consists of approximately 100.0% of Rehabilitated 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 at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED).

Sufficient Credit Enhancement: Credit enhancement (CE) is provided by approximately $6,305,909 of overcollateralization (OC) and excess spread. At closing, a senior parity of 104.08% and total parity of 102.08% is expected. Cash may be released to the issuer when the target OC, equal to the greater of 2.25% of the adjusted pool balance or $460,000, has been reached. Fitch reviewed transaction cash flows that were stressed at a level commensurate with Fitch's 'AAAsf' rating categories for the senior notes and 'Asf' for the subordinate notes. The cash flow results were satisfactory under corresponding stress scenarios for the senior and subordinate classes of notes.

Adequate Liquidity Support: Liquidity support for the EDUSA 2014-4 notes is provided by a $7 million capitalized interest fund, and a $753,381 reserve fund. The debt service reserve fund requirement will be equal to the greater of 0.80% of the outstanding pool balance and 0.15% of the initial pool balance, prior to the July 2019 distribution date, and on or after the July 2019 distribution date, the greater of 0.25% of the outstanding pool balance and 0.15% of the initial pool balance.

The capitalized interest fund balance will step down to $4,500,000 on the December 2015 distribution date and any remaining funds will be disbursed as available funds on the July 2016 distribution date. The capitalized interest and debt service fund will be funded at closing with note proceeds.

Acceptable Servicing Capabilities: Great Lakes Educational Services Inc. (GLESI) and Pennsylvania Higher Education Assistance Agency (PHEAA) are the servicers at 72.3% and 27.7%, respectively. Fitch has reviewed the servicing operations of each servicer and believes them to be acceptable servicers of FFELP student loans.

RATING SENSITIVITIES

Since FFELP student loan ABS rely 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 CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Key Rating Drivers and Rating Sensitivities are further described in the pre-sale report titled 'Edsouth Indenture No. 8 LLC, Series 2014-4', dated Dec. 10, 2014, available on www.fitchratings.com.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (June 23, 2014);

--'Edsouth Indenture No. 8, LLC, Series 2014-4' (Dec. 10, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

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

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

Edsouth Indenture No. 8, LLC, Series 2014-4 (US ABS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=834628

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=957055

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Contacts

Fitch Ratings
Primary Analyst:
Charlene M. Davis, +1-212-908-0213
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Victoria Ohorodnyk, +1-212-908-0866
Associate Director
or
Committee Chairperson:
Tracy Wan, +1-212-908-9171
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Charlene M. Davis, +1-212-908-0213
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Victoria Ohorodnyk, +1-212-908-0866
Associate Director
or
Committee Chairperson:
Tracy Wan, +1-212-908-9171
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com