NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings for the senior class A notes issued by KnowledgeWorks Foundation Series 2010 at 'AAAsf'. The Rating Outlook remains Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral comprises 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. Fitch currently rates the U.S. 'AAA'/Stable Outlook.
Sufficient Credit Enhancement: Credit enhancement (CE) is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of January 2016, senior parity is 115.99%, and the trust cannot release cash until all notes have been paid in full.
Adequate Liquidity Support: Liquidity support is provided by a Debt Service Reserve Fund currently sized at the greater of 0.25% of the outstanding note balance, and $130,574. As of January 2016, the debt service reserve fund balance is $130,574.
Acceptable Servicing Capabilities: Xerox-ES and Great Lakes Educational Loan Services, Inc. are responsible for the day-to-day servicing of the loans in the trust. In Fitch's opinion, they are acceptable servicers 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 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.
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 U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)
Dodd-Frank Rating Information Disclosure Form