NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms all notes issued by National Collegiate Student Loan Trust 2006-1, National Collegiate Student Loan Trust 2006-2 and National Collegiate Student Loan Trust 2006-3. Fitch's 'U.S. Private SL ABS Criteria' and 'Global Structured Finance Rating Criteria' were used to review the ratings. The rating actions are detailed at the end of this release.
KEY RATING DRIVERS
Collateral Quality: All trusts are collateralized by private student loans originated by various financial institutions and securitized by First Marblehead Corporation. The performance of the loans continues to deteriorate from the last review and as such default projections have increased. At deal inception all loans were guaranteed by The Education Resources Institute (TERI), however, no credit was given to the TERI guaranty since TERI filed for bankruptcy on April 7, 2008.
Credit Enhancement: Credit enhancement is provided by a combination of overcollateralization and excess spread. The class A, B and C notes also benefit from subordination. Based on the projected remaining defaults for all trusts that range from 30% to 45%, all outstanding notes have sufficient loss coverage to maintain the current ratings.
Liquidity Support: Liquidity support for the notes is provided by a reserve account for each trust.
Acceptable Servicing Capabilities: The portfolio is serviced by PHEAA. Fitch believes PHEAA is an acceptable servicers of private student loans.
For each trust, Fitch conducted a review of the collateral performance that involved the calculation of loss coverage multiples based on the most recent variables. A projected net loss amount was compared to available credit enhancement to determine the loss multiples. Fitch used historical vintage loss data previously provided by First Marblehead Corporation in addition to other analytical methods we see as fit to form a loss timing curve representative of the private student loan collateral pools of each trust. After giving credit for seasoning of loans in repayment, Fitch applied the current cumulative gross loss level to this loss timing curve to derive the expected gross losses over the remaining life for each trust. A recovery rate of 25% was applied, which was determined to be appropriate based on the latest data provided by the issuer.
The available credit enhancement for the trusts consists of excess spread, overcollateralization (if any), and subordination where applicable.
Fitch also applied a Recovery Estimates (RE) to classes rated 'CCC' or below as these ratings classify these notes as distressed structured finance securities. Fitch has calculated a RE which represents Fitch's calculation of expected principal recoveries, as a percentage of current note principal outstanding. Each of the notes rated 'CCC' or below was assigned an RE respectively, given Fitch's calculation.
The collateral supporting each trust consists entirely of private student loans originated by various financial institutions and lenders. Loan proceeds are used by students to assist in financing the cost of attending undergraduate, law school, business school, medical school, dental school, and other graduate programs. In November 2012, First Marblehead Education Resources, a subsidiary of First Marblehead resigned as special servicer and U.S. Bank, the backup special servicer for all trusts assumed the role.
RATING SENSITIVITIES
As Fitch's base case default proxy is derived primarily from historical collateral performance, actual performance may differ from the expected performance, resulting in higher loss levels than the base case. This will result in a decline in CE and remaining loss coverage levels available to the notes and may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
National Collegiate Student Loan Trust 2006-1
--Class A-3 at 'Csf'; RE 70%;
--Class A-4 at 'Csf'; RE 70%;
--Class A-5 at 'Csf'; RE 70%;
--Class B at 'Csf'; RE 0%;
--Class C at 'Csf'; RE 0%.
National Collegiate Student Loan Trust 2006-2
--Class A-2 at 'Csf'; RE 55%;
--Class A-3 at 'Csf'; RE 55%;
--Class A-4 at 'Csf'; RE 55%;
--Class B at 'Csf'; RE 0%;
--Class C at 'Csf'; RE 0%.
National Collegiate Student Loan Trust 2006-3
--Class A-3 at 'CCsf'; RE 70%;
--Class A-4 at 'CCsf'; RE 70%;
--Class A-5 at 'CCsf'; RE 70%;
--Class B at 'Csf'; RE 0%;
--Class C at 'Csf'; RE 0%;
--Class D at 'Csf'; RE 0%.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. Private Student Loan ABS Criteria (pub. 31 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868836
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990889
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990889
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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