Fitch Expects to Rate Iowa Student Loan Liquidity Corporation Senior 2016A; Presale Issued

NEW YORK--()--Link to Fitch Ratings' Report: Iowa Student Loan Liquidity Corporation Series 2016A (US ABS)

https://www.fitchratings.com/site/re/888769

Fitch Ratings expects to rate the Iowa Student Loan Liquidity Corporation Senior 2016A student revenue bonds from a Trust Indenture, dated November 2011 (General Indenture) as follows:

2016A-1

--$2,765,000 2016A-1 (Serial 2017) 'Asf(EXP)'; Outlook Stable;

--$2,765,000 2016A-1 (Serial 2018) 'Asf(EXP)'; Outlook Stable;

--$2,765,000 2016A-1 (Serial 2019) 'Asf(EXP)'; Outlook Stable;

--$3,685,000 2016A-1 (Serial 2020) 'Asf(EXP)'; Outlook Stable;

--$4,605,000 2016A-1 (Serial 2021) 'Asf(EXP)'; Outlook Stable;

--$4,605,000 2016A-1 (Serial 2022) 'Asf(EXP)'; Outlook Stable;

--$6,140,000 2016A-1 (Serial 2023) 'Asf(EXP)'; Outlook Stable;

--$6,140,000 2016A-1 (Serial 2024) 'Asf(EXP)'; Outlook Stable;

--$4,600,000 2016A-1 (Serial 2025) 'Asf(EXP)'; Outlook Stable;

--$3,065,000 2016A-1 (Serial 2026) 'Asf(EXP)'; Outlook Stable;

--$3,065,000 2016A-1 (Serial 2027) 'Asf(EXP)'; Outlook Stable;

--$3,065,000 2016A-1 (Serial 2028) 'Asf(EXP)'; Outlook Stable;

--$3,680,000 2016A-1 (Serial 2029) 'Asf(EXP)'; Outlook Stable;

--$1,395,000 2016A-1 (Serial 2030) 'Asf(EXP)'; Outlook Stable;

--$2,645,000 2016A-1 (Serial 2031) 'Asf(EXP)'; Outlook Stable.

2016A-2

--$6,235,000 2016A-2 (Serial 2017) 'Asf(EXP)'; Outlook Stable;

--$6,235,000 2016A-2 (Serial 2018) 'Asf(EXP)'; Outlook Stable;

--$6,235,000 2016A-2 (Serial 2019) 'Asf(EXP)'; Outlook Stable;

--$8,315,000 2016A-2 (Serial 2020) 'Asf(EXP)'; Outlook Stable;

--$10,395,000 2016A-2 (Serial 2021) 'Asf(EXP)'; Outlook Stable;

--$10,395,000 2016A-2 (Serial 2022) 'Asf(EXP)'; Outlook Stable;

--$13,860,000 2016A-2 (Serial 2023) 'Asf(EXP)'; Outlook Stable;

--$13,860,000 2016A-2 (Serial 2024) 'Asf(EXP)'; Outlook Stable;

--$10,400,000 2016A-2 (Serial 2025) 'Asf(EXP)'; Outlook Stable;

--$6,935,000 2016A-2 (Serial 2026) 'Asf(EXP)'; Outlook Stable;

--$6,935,000 2016A-2 (Serial 2027) 'Asf(EXP)'; Outlook Stable;

--$6,935,000 2016A-2 (Serial 2028) 'Asf(EXP)'; Outlook Stable;

--$8,320,000 2016A-2 (Serial 2029) 'Asf(EXP)'; Outlook Stable;

--$3,160,000 2016A-2 (Serial 2030) 'Asf(EXP)'; Outlook Stable;

--$5,985,000 2016A-2 (Serial 2031) 'Asf(EXP)'; Outlook Stable.

Fitch also expects to affirm the 'Asf'/Outlook Stable ratings of the existing bonds in the trust indenture dated Nov. 1, 2011 at closing.

KEY RATING DRIVERS

Adequate Collateral Quality: The General Indenture will be collateralized by existing student loans under the ISL Private Student Loan Program and new fixed and floating rate student loans originated under the Link Medical Refinance Program from deal closing to Sept. 30, 2018 (acquisition period). It is expected that approximately $180 million of the Link Loans will be in the trust after the acquisition period comprising of $52 million of existing and remaining of newly originated.

Sufficient Credit Enhancement: The trust passed all stressed scenarios at Fitch's 'A' rating category. Credit enhancement (CE) is provided by overcollateralization (OC; the excess of the trust's asset balance over the bond balance) and excess spread. The parity ratio (total assets to total liabilities) is expected to be 150.5% at closing.

Adequate Liquidity Support: Liquidity support is provided by a reserve account sized at the greater of 2.0% of the outstanding bond balance or 1% of the initial total bond balance. Cash cannot be release from the trust until all the 2011A bonds are paid-in-full and the 2011A swaps are no longer in effect, and provided the senior parity percentage is at least 200%.

Satisfactory Servicing Capabilities: Aspire Resources Inc. (Aspire), a wholly owned subsidiary of ISL, will service the portfolio of loans, and Pennsylvania Higher Education Assistance Agency (PHEAA) will act as the backup servicer. Fitch views Aspire and PHEAA as adequate servicers.

RATING SENSITIVITIES

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 'Iowa Student Loan Liquidity Corporation Series 2016A, dated Oct. 7, 2016.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under 'Related Research' on the presale report. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions,' dated May 31, 2016.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016)

https://www.fitchratings.com/site/re/884964

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/site/re/879815

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

U.S. Private Student Loan ABS Criteria (pub. 31 Jul 2015)

https://www.fitchratings.com/site/re/868836

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1012833

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1012833

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Emily Lee
Director
+1-212-908-0667
Fitch Ratings, Inc.
33 Whitehall St
New York, NY 10004
or
Secondary Analyst
Nicole Edwards
Director
+1-212-908-9114
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-0156
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Emily Lee
Director
+1-212-908-0667
Fitch Ratings, Inc.
33 Whitehall St
New York, NY 10004
or
Secondary Analyst
Nicole Edwards
Director
+1-212-908-9114
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-0156
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com