NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken the following rating actions on SLC Student Loan Trust 2004-1 administered by Navient:
--Class A-5 affirmed at 'AAAsf'; Outlook Stable;
--Class A-6 affirmed at 'AAAsf'; Outlook Stable;
--Class A-7 'AAAsf'; Rating Watch Negative maintained;
--Class B 'Asf'; Rating Watch Negative maintained.
KEY RATING DRIVERS
Maturity Risk: The Rating Watch Negative is based on the heightened risk of SLC 2004-1 class A-7 and class B notes missing their legal final maturities of Nov. 15, 2027 and Aug. 5, 2031, respectively, 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 after the legal final. The magnitude of the rating action could vary 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 downgraded to non-investment grade rating categories. Fitch expects to complete its review and resolve the Rating Watch status over the next three to six months.
High Collateral Quality: The trust collateral is comprised of 100% of 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. The current U.S. sovereign rating is at 'AAA' with a Stable Outlook.
Credit Enhancement: Credit Enhancement is provided by overcollateralization, excess spread and for the class A notes, subordination provided by the class B notes. The trust, below the 40% pool factor threshold, can release cash as long as total parity, not including the reserve account, is 100.00%. The trust has been releasing cash and maintaining this parity level.
Liquidity Support: Liquidity support is provided by a reserve account (0.25% of the pool balance or $2,250,000).
Acceptable Servicing Capabilities: Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.), as servicer, will be responsible for servicing the portfolio. Fitch has reviewed the servicing operations of Navient Solutions and believes it to be acceptable servicer of FFELP student loans.
Fitch Ratings reviewed SLC Student Loan Trust 2004-1 using its existing and proposed FFELP ABS criteria, listed below.
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 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.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 18 Nov 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)
Dodd-Frank Rating Information Disclosure Form