NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the Mississippi Higher Education Assistance Corp., Series 2014 senior note at 'AAAsf'. The Rating Outlook is Stable. The subordinate note is not rated by Fitch.
KEY RATING DRIVERS
High Collateral Quality: The trust 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. Fitch currently rates the U.S. 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement (CE): CE is provided by excess spread and overcollateralization. Additionally, the class A note benefits from subordination provided by the class B note. Parity levels continue to increase as cash cannot be released until all the bonds are paid-in-full. As of the June 2016 distribution report, the senior and total parity levels were at 107.13% and 103.47%, respectively.
Adequate Liquidity: Liquidity support is provided by a reserve account sized at the greater of 0.25% of the outstanding pool balance and $600,000. The reserve account is currently sized at $739,130.
Acceptable Servicing Capabilities: Navient Solutions, Inc. and Xerox Education Services are responsible for the day-to-day servicing of this trust. Additionally, Navient Solutions, Inc. acts as the back-up servicer for this trust. In Fitch's opinion, both entities are acceptable servicers of FFELP student loans.
In certain LIBOR-down interest rate stress scenarios the basis spread may be compressed, as Fitch would apply a floor to 1-month LIBOR at a negative rate level in accordance with Fitch's "Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds" dated May 2016. Since the updated interest rate stresses are not addressed yet in existing FFELP criteria, this represents a criteria variation. Use of the criteria variation did not have a measurable impact upon the ratings assigned.
Under the Counterparty Criteria for Structured Finance and Covered Bonds, dated May 14, 2014, Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness. The definition of the permitted investment for this deal allows possibility of using investments not rated by Fitch, this represents a criteria variation. Since the only available funds to invest in are those held in the Collection Account and the funds can only be invested for a short duration of three months given the payment frequency of the notes, Fitch doesn't believe such variation have a measurable impact upon the ratings assigned.
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.
Fitch has affirmed the following ratings:
Mississippi Higher Education Assistance Corp., Series 2014
--Class A at 'AAAsf'; Outlook Stable.
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. 17 May 2016)
Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)
Mississippi Higher Education Assistance Corp., Series 2014-1 -- Appendix
Dodd-Frank Rating Information Disclosure Form