NEW YORK--(BUSINESS WIRE)--Fitch Ratings takes various rating actions on the following senior, subordinate and junior subordinate notes issued by Goal Capital Funding Trust Series 2007-1:
--Senior class A-3 notes affirmed at 'AAAsf'; Outlook Stable;
--Senior class A-4 notes 'AAAsf', remains on Rating Watch Negative;
--Senior class A-5 notes 'AAAsf', placed on Rating Watch Negative;
--Subordinate class B-1 'AA+sf', remains on Rating Watch Negative;
--Junior subordinate class C-1 notes affirmed at 'BBBsf'; Outlook Stable.
KEY RATING DRIVERS
The Rating Watch Negative action on class A-5 notes is due to their inability to pass 'AAA' credit stresses. In addition, the Rating Watch Negative is maintained on class A-4 notes due to the heightened risk of the class A-4 notes missing their legal final maturity date of March 25, 2036, 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 its revised FFELP criteria report is published.
Collateral Quality: The collateral consists of 100% of 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. Fitch currently rates the U.S. sovereign 'AAA' with a Stable Outlook.
Credit Enhancement: Both the senior and subordinate notes will benefit from the credit enhancement provided by overcollateralization (OC) or the excess of the trust's asset balance over bond balance, and the senior class A notes and subordinate class B-1 notes will also benefit from subordination provided by the class C-1 notes. As of the last distribution date in February 2016, total parity is 100.61%, subordinate parity is 101.27% and senior parity is 107.11%. Currently, no cash is being released from the trust. After the class C notes have been paid in full from excess cash available, cash may then be released from the trust to the certificate holders after the trust's cash release requirements have been satisfied.
Adequate Liquidity Support: Liquidity support is provided by a Debt Service Reserve Fund sized at the greater of 0.25% of the current pool balance and 0.15% of the initial pool balance. As of February 2016, the debt service reserve fund is sized at $1,648,140.
Servicing Capabilities: Day-to-day servicing will be provided by American Education Services (AES), a servicing division of the Pennsylvania Higher Education Assistance Agency (PHEAA), and Xerox-ES, formerly ACS Education Services, Inc. Fitch deems each of these servicers to have satisfactory servicing operations at this time.
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.
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
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