NEW YORK--(BUSINESS WIRE)--(This is a correction of a release published earlier today. It clarifies the language with respect to the government sponsored student loan payment plans.)
Fitch Ratings has placed 57 tranches from 23 trusts of U.S. Federal Family Education Loan Program (FFELP) student loan ABS on Rating Watch Negative. Approximately $8 billion FFELP bonds are at risk. A full list of ratings follows at the end of this press release.
The rating actions are based on analysis conducted by Fitch that identified trusts with tranches that have heightened risk of missing legal final maturity dates based on principal repayment to date.
The transactions identified will be subject to additional analysis over the next few months. Fitch's additional analysis will focus on the remaining time to maturity, recent and historical payment trends, breakeven payment speed thresholds, and structural factors to ensure that the likelihood of payment at maturity is commensurate with the ratings assigned.
The magnitude of the rating actions could vary significantly depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors. Absent any issuer actions, structural or other mitigants, it is possible that 'AAA' ratings could be lowered to non-investment grade rating categories. Fitch expects to complete its review and resolve the Rating Watch status for all trusts over the next three to six months.
In taking the actions, Fitch has identified trusts with one or more individual tranches most likely to miss their legal final maturities, which would result in an event of default. In an event of such technical default, Fitch would expect ultimate repayment of full principal and interest on all tranches after the legal final. Tripping an event of default, however, could have adverse rating implications for additional tranches. The rating implications will depend on the waterfall mechanics and voting rights and actions of investors. When an event of default occurs, it is highly likely that the class B notes will not receive timely interest as the principal for the class A notes must be paid in full prior to the class B notes receiving interest. Therefore, the subordinate notes are placed on Rating Watch Negative for all affected trusts.
The main drivers of the heightened maturity risk are prepayments and principal repayment rates coming in slower than initial expectations. The decline in prepayment rates has followed the consolidation wave and a slow recovery in the job market for graduates during and after the recession. The growth of government sponsored student loan payment plans, such as the Income-Based Repayment Plan has also helped push down repayment speeds. Helping offset these declines more recently are an improving in labor market, expansion of debt consolidation programs, seasoning of portfolios and recent issuer actions to address this risk.
Fitch has placed the following ratings on Rating Watch Negative:
Access Group, Inc. 2004-2 Indenture of Trust:
--Class A-2 at
'B-sf'; Rating Watch Negative;
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class A-4 at 'AAAsf'; Rating Watch Negative;
--Class
A-5 at 'AAAsf'; Rating Watch Negative;
--Class B at 'B-sf'; Rating
Watch Negative;
Access Group, Inc. Series 2007-1:
--Class A-3 at 'AAAsf'; Rating
Watch Negative;
--Class B at 'AAAsf'; Rating Watch Negative;
--Class
C at 'Asf'; Rating Watch Negative;
Nelnet Student Loan Trust 2008-1:
--Class A-3 at 'AAAsf'; Rating
Watch Negative;
--Class B at 'Asf'; Rating Watch Negative;
Nelnet Student Loan Trust 2008-3:
--Class A-4 at 'AAAsf'; Rating
Watch Negative;
North Carolina State Education Assistance Authority - 1995 Master Trust
(NC):
--2005P at 'AAAsf'; Rating Watch Negative;
SLC Student Loan Trust 2004-1:
--Class A-7 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'Asf'; Rating Watch Negative;
SLC Student Loan Trust 2008-2:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'Asf'; Rating Watch Negative;
SLC Student Loan Trust 2009-1:
--Class A-2 at 'AAAsf'; Rating Watch
Negative;
SLM Student Loan Trust 2002-7:
--Class A-6 at 'AAAsf'; Rating Watch
Negative;
--Class A-7 at 'AAAsf'; Rating Watch Negative;
--Class
A-8 at 'AAAsf'; Rating Watch Negative;
--Class A-9 at 'AAAsf';
Rating Watch Negative;
--Class A-10 at 'AAAsf'; Rating Watch
Negative;
--Class A-11 at 'AAAsf'; Rating Watch Negative;
--Class
B at 'Asf'; Rating Watch Negative;
SLM Student Loan Trust 2003-2:
--Class A-6 at 'AAAsf'; Rating Watch
Negative;
--Class A-7 at 'AAAsf'; Rating Watch Negative;
--Class
A-8 at 'AAAsf'; Rating Watch Negative;
--Class A-9 at 'AAAsf';
Rating Watch Negative;
--Class B at 'BBBsf'; Rating Watch Negative;
SLM Student Loan Trust 2005-1:
--Class A-2 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'AAAsf'; Rating Watch Negative;
SLM Student Loan Trust 2005-2:
--Class A-5 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'AAsf'; Rating Watch Negative;
SLM Student Loan Trust 2007-2:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'Asf'; Rating Watch Negative;
SLM Student Loan Trust 2007-3:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'Asf'; Rating Watch Negative;
SLM Student Loan Trust 2007-7:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class A-4 at 'AAAsf'; Rating Watch Negative;
--Class
B at 'Asf'; Rating Watch Negative;
SLM Student Loan Trust 2008-1:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class A-4 at 'AAAsf'; Rating Watch Negative;
--Class
B at 'Asf'; Rating Watch Negative;
SLM Student Loan Trust 2008-3:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'A+sf'; Rating Watch Negative;
SLM Student Loan Trust 2008-6:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'Asf'; Rating Watch Negative;
SLM Student Loan Trust 2008-7:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'Asf'; Rating Watch Negative;
SLM Student Loan Trust 2008-8:
--Class A-3 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'AA+sf'; Rating Watch Negative;
SLM Student Loan Trust 2012-5:
--Class A-2 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'AAsf'; Rating Watch Negative;
SLM Student Loan Trust 2012-7:
--Class A-2 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'A+sf'; Rating Watch Negative;
SLM Student Loan Trust 2013-1:
--Class A-2 at 'AAAsf'; Rating Watch
Negative;
--Class B at 'A+sf'; Rating Watch Negative.
Additional information is available at www.fitchratings.com.
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
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