NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to rate Navient Student Loan Trust 2015-3 as follows:
--$252,200,000 class A-1 notes 'AAAsf(exp)'; Outlook Stable;
--$486,000,000 class A-2 notes 'AAAsf(exp)'; Outlook Stable;
--$20,000,000 class B notes 'A+sf(exp)'; Outlook Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of Federal Family Education Loan Program (FFELP) loans, including approximately 20.2% of rehab loans, with guaranties provided by 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. at 'AAA'/Stable Outlook.
Sufficient Credit Enhancement: Cash flow scenarios for the class A and B notes were satisfactory under Fitch's 'AAAsf' and 'A+sf' stresses, respectively. Credit enhancement (CE) is provided by overcollateralization (OC), excess spread and, for the class A notes, approximately 2.64% of subordination provided by the class B notes. A target OC amount equal to the greater of 1.5% of the adjusted pool balance and $3.0 million must be met before excess cash can be released.
Adequate Liquidity Support: Liquidity support is provided by a reserve account sized at 1.65% of the initial student loan balance which is funded at closing. The required reserve account balance for any distribution dates prior to June 25, 2016 (the step-down date) is 1.65% of the current student loan balance. Thereafter, the requirement will be the greater of 0.25% of the current student loan balance and 0.10% of the initial student loan balance.
Acceptable Servicing Capabilities: Navient Solutions, Inc. will service 100% of the trust's student loan pool. In Fitch's opinion, Navient Solutions, Inc. 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 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 'Navient Student Loan Trust 2015-3', and for a further discussion on the representations, warranties, and enforcement mechanisms available to investors in this transaction, please see the related presale appendix, dated June 4, 2015, available on www.fitchratings.com, or by clicking on the link.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Additional information is available at www.fitchratings.com.
Navient Student Loan Trust 2015-3
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866852
Applicable Criteria
Global Structured Finance Rating Criteria (pub. 31 Mar 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268
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=985818
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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