NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken the following rating actions on SLM Student Loan Trust 2006-8:
--Class A-4 affirmed at 'AAAsf'; Outlook Stable;
--Class A-5 'AAAsf'; Rating Watch Negative maintained;
--Class A-6 affirmed at 'AAAsf'; Outlook Stable;
--Class B affirmed at 'Asf'; Outlook Stable.
KEY RATING DRIVERS
Maturity Risk: Maintaining the Negative Watch is based on the heightened risk of the class A-5 notes missing their legal final maturity date of Jan. 25, 2025, 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. Fitch expects to resolve the Rating Watch Negative status once our revised FFELP criteria report is published. The magnitude of any potential rating action could vary depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors.
Collateral Quality: The collateral consists of 100% Federal Family Education Loan Program (FFELP) 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 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 'AAA' with a Stable Outlook.
Credit Enhancement (CE): CE is provided by excess spread, and for the senior notes, subordination provided by the subordinate notes. As of December 2015, senior and total parities are 104.69% (4.48% CE) and 100.00%, respectively. Senior and total parities have remained steady at their respective levels due to excess cash being released and the trust passing the stepdown date.
Liquidity Support: Support is provided by a debt service reserve fund sized at the greater of 0.25% of the bond balance or $4,524,085. The debt service reserve fund is currently sized at the $4,524,085 floor.
Servicing Capabilities: Navient Solutions, Inc. is responsible for the day-to-day servicing of the loans in the trust. In Fitch's opinion, they are an acceptable servicer of FFELP student loans.
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.
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 buildup 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.
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. 04 Dec 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