Fitch: No Rating Impacts from Navient's Omnibus ABS Amendment

NEW YORK--()--Navient Inc.'s (Navient) Omnibus Amendment (the amendment) to certain student loan ABS transactions listed below (collectively, the trusts) on Sept. 15, 2015 is not expected to affect ratings assigned to the notes issued by the trusts or Navient's corporate debt rating.

From the perspective of the 'BB' corporate debt rating assigned to Navient, Fitch views this as incrementally negative, but not impacting the rating or Outlook. Fitch understands that Navient is seeking to avoid the adverse market perception associated with a technical default under the ABS trusts, even if ultimate repayment is highly likely. That said, Navient is effectively converting cash on hand to a secured asset, backed by a first loss position in the ABS transactions. Depending on the magnitude of loans extended to the trusts and the performance of the collateral thereafter, this could adversely affect Navient, although this is not envisioned at this time.

The amendment allows for additional purchases of loans from the trusts and arranges for the trusts to borrow under a Revolving Credit Agreement (RCA) on a subordinated basis. The loan purchases and any borrowings under the RCA are designed to help ensure payment obligations are met by the trusts' legal final maturity dates. Recent slow borrower payments due to deferments, forbearances, or income-based repayment plans have put certain trusts at heightened risk for a maturity default.

The RCA allows the trusts to borrow from Navient at or before a scheduled note maturity date to cover any payment shortfalls on the legal final maturity date. Any borrowings and interest thereon will be repaid from the trust at the bottom of the waterfall one step above any cash release. Borrowed funds will accrue interest at a rate of one-month LIBOR plus a spread deemed in good faith by Navient to be a market rate.

Allowable loan purchase amounts are being increased to 10% of each trust's initial pool balance from the previously allowed amount of 2% of the initial pool balance for some of the trusts. The increased purchase amount is allowable as long as the A-1 note maturity date has passed.

The amended trusts include:

--SLM Student Loan Trust 2003-1

--SLM Student Loan Trust 2003-4

--SLM Student Loan Trust 2003-5

--SLM Student Loan Trust 2003-7

--SLM Student Loan Trust 2003-11

--SLM Student Loan Trust 2003-14

--SLM Student Loan Trust 2004-1

--SLM Student Loan Trust 2004-3

--SLM Student Loan Trust 2004-10

--SLM Student Loan Trust 2005-4

--SLM Student Loan Trust 2005-5

--SLM Student Loan Trust 2005-10

--SLM Student Loan Trust 2006-1

--SLM Student Loan Trust 2007-6

--SLM Student Loan Trust 2007-8

--SLM Student Loan Trust 2012-3

Additional information is available on www.fitchratings.com

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Contacts

Fitch Ratings
Asset-Backed Securities:
Primary Analyst
Harry Kohl
Associate Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Tracy Wan
Senior Director
+1-212-908-9171
or
Financial Institutions:
Primary Analyst
Tyra Junaid
Director
+1-212-908-0291
or
Secondary Analyst
Meghan Neenan, CFA
Senior Director
+1-212-908-9121
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Asset-Backed Securities:
Primary Analyst
Harry Kohl
Associate Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Tracy Wan
Senior Director
+1-212-908-9171
or
Financial Institutions:
Primary Analyst
Tyra Junaid
Director
+1-212-908-0291
or
Secondary Analyst
Meghan Neenan, CFA
Senior Director
+1-212-908-9121
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com