NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the senior notes at 'AAAsf' and the subordinate notes at 'AAsf', issued by Educational Funding of the South, Inc. 2003 Indenture, Series 2012-1. The Rating Outlook on all notes, which is tied to the sovereign rating of the U.S. government, is Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral comprises Federal Family Education Loan Program (FFELP) 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. '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 April 2015, senior and total parity is 108.43% and 104.52%, respectively. Additionally, the trust is in turbo and no cash will be released until all notes have been paid in full.
Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund currently sized at $2,044,201 (0.50% of the bond balance, with a floor of $922,391).
Acceptable Servicing Capabilities: Day-to-day servicing will be provided by PHEAA, which Fitch believes to be and acceptable servicer of FFELP loans.
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 credit enhancement driven by positive excess spread given 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:
Educational Funding of the South, Inc. 2003 Indenture, Series 2012-1:
--Class A at 'AAAsf'; Outlook Stable;
--Class B at 'AAsf'; Outlook Stable.
Additional information is available at www.fitchratings.com.
Global Structured Finance Rating Criteria (pub. 31 Mar 2015)
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)
Dodd-Frank Rating Information Disclosure Form