NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to rate the Vermont Student Assistance Corporation education loan revenue bonds, senior series 2016A issued under the 2012 master trust, indenture, dated June 1, 2012 as follows, as amended by the supplemental trust indenture dated, June 1, 2016:
--Senior Series 2016A (Serials 2021-2032 and 2034) 'Asf(EXP)'; Outlook Stable
Fitch also expects to affirm the ratings of the existing bonds senior series 2012A and senior series 2013A bonds issued under the 2012 master trust indenture at 'Asf' and maintain the Stable Outlook on the closing date for the senior series 2016A bonds.
KEY RATING DRIVERS
Adequate Collateral Quality: The master trust will be collateralized by existing and new fixed-rate private student loans to be originated from deal closing to June 15, 2017. It is expected that approximately $37.28 million of student loans will be added to the trust at the end of the acquisition period. All loans have been or will be originated under the Vermont's fixed- rate Student Advantage Loan Program and Parent Advantage Loan Program.
Sufficient Credit Enhancement (CE): Transaction cash flows were satisfactory under all stressed scenarios at Fitch's 'Asf' rating category. CE is provided by overcollateralization and excess spread. The parity ratio is expected to be 135.19% at closing. Cash will be released to the issuer when the parity reaches 136%.
Adequate Liquidity Support: Liquidity support will be provided by a $1.173 million debt service reserve fund sized at 2% of the outstanding bond balance, with a minimum balance of $300,000.
Satisfactory Servicing Capabilities: Day-to-day servicing will be provided by VSAC, which has been servicing their own loans. Fitch views VSAC as an acceptable servicer.
As Fitch's base case default proxy is derived primarily from historical collateral performance, actual performance may differ from the expected performance, resulting in higher loss levels and/or prepayment speeds than the base case. This will result in a decline in available CE and the remaining loss coverage levels available to the notes. Therefore, note ratings may be susceptible to potential negative rating actions, depending on the extent of the decline in the coverage.
Rating sensitivity results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. Rating sensitivity should not be used as an indicator of future rating performance.
Fitch's stress analysis is discussed in the presale titled 'Vermont Student Assistance Corporation Senior Series 2016A,' dated May 6, 2016.
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.
Vermont Student Assistance Corporation, Senior Series 2016A (US ABS)
Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
U.S. Private Student Loan ABS Criteria (pub. 31 Jul 2015)
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1