Fitch Takes Various Actions on Connecticut Student Loan Foundation Indenture of Trust 2004

NEW YORK--()--Fitch Ratings has taken the following rating actions on Connecticut Student Loan Foundation - Indenture of Trust 2004:

--Series 2004 A-3 affirmed at 'AAAsf'; Outlook Stable;

--Series 2006 A-1 'AAAsf'; Rating Watch Negative maintained;

--Series 2006 A-2 'AAAsf'; Rating Watch Negative maintained;

--Series 2004 B 'AAsf'; Rating Watch Negative maintained;

--Series 2006 B 'AAsf'; Rating Watch Negative maintained.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised of 98% of Federal Family Education Loan Program (FFELP) loans, including 11.56% of FFELP rehab loans, and approximately 2.3% of private student loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED) for the FFELP loans which comprises the majority of the portfolio.

Sufficient Credit Enhancement (CE): CE is provided by excess spread and overcollateralization. Parity levels continue to improve, and as of Dec. 31, 2014 was 110.95% and 151.2% for total and senior parity respectively. Additionally the class A notes benefit from approximately 27% subordination provided by the class B notes. Excess cash can be released as long as the total parity is maintained at 102.5% and senior parity is 105.0%.

Adequate Liquidity Support: Liquidity support is provided by a reserve account (0.75% of the outstanding principal amount of the bonds or $2,151,500).

Acceptable Servicing Capabilities: The loans are serviced by Educational Services of America Inc., (EdFinancial) which in Fitch's opinion is an acceptable servicer.

On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria.

RATING SENSITIVITIES

Since the FFELP student loan ABS relies 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, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a build-up of CE 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.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 04 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874971

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1000833

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000833

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Nicole Edwards, +1-212-908-9114
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan, +1-212-908-9156
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Nicole Edwards, +1-212-908-9114
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan, +1-212-908-9156
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com