NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the senior and subordinate notes for SLM Student Loan Trust 2002-7 at 'AAAsf' and 'Asf', respectively. The Rating Outlook remains Stable.
Despite the affirmation, Fitch believes all SLM 2002-7 outstanding notes carry significant extension risk. Based on Fitch's cash flow modelling runs, the class A notes were not paid in full by their legal final maturity date on March 15, 2028, and the class B notes were not paid in full by their final legal maturity date on Dec. 15, 2039. Under such scenarios, this may result in technical defaults, although Fitch would expect ultimate repayment of full principal and interest afterwards. Furthermore, a recent servicing agreement amendment dated Jan. 22, 2015 allows Navient Solutions, Inc. to make an optional loan purchase from the trust in value up to 10% of the initial pool balance; which, if exercised, would help the notes to meet their maturity dates.
A full list of rating actions follows at the end of this ratings action commentary.
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. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement (CE): CE is provided by excess spread and, for the class A notes, subordination provided by the class B notes. As of February 2015, excluding the reserve account, total parity is 100.00% and senior parity is 110.12% (9.19% CE). Including the reserve, total effective parity is 100.30% and senior effective parity is 110.45%. Cash is being released from the trust given that the target total parity of 100% is maintained.
Adequate Liquidity Support: Liquidity support is provided by a reserve account which is sized at the greater of 0.25% of the pool balance and $1,975,947, currently equal to the floor.
Acceptable Servicing Capabilities: Day-to-day servicing is provided by Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.). In Fitch's opinion, this servicer is an acceptable servicer 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 build-up of credit enhancement driven by positive excess spread, given that favorable basis factor conditions could lead to future upgrades.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
SLM Student Loan Trust 2002-7:
--$94,550,000 class A-6 notes at 'AAAsf; Outlook Stable
--$100,000,000 class A-7 notes at 'AAAsf; Outlook Stable
--$100,000,000 class A-8 notes at 'AAAsf; Outlook Stable
--$100,000,000 class A-9 notes at 'AAAsf; Outlook Stable
--$100,000,000 class A-10 notes at 'AAAsf; Outlook Stable
--$100,000,000 class A-11 notes at 'AAAsf; Outlook Stable
--$59,850,000 class B notes at 'Asf; Outlook Stable
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781
Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Jul 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752340
Global Structured Finance Rating Criteria (pub. 31 Mar 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530
Additional Disclosures
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985470
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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