Fitch to Rate State Board of Regents of the State of Utah Series 2014-1; Presale Issued
NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to assign the following rating to the State Board of Regents of the State of Utah Series 2014-1 (UTAH 2014-1) student loan backed notes:
--$277,000,000 2014-1 notes 'AAAsf'(EXP); Outlook Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of Federal Family Education Loan Program (FFELP) loans (including less than 2% of rehabilitated loans). In Fitch's opinion, the credit quality of the trust collateral is high based on the guaranties provided by the transaction's eligible guarantors and at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED). The U.S. is currently rated 'AAA' with a Stable Outlook by Fitch.
Sufficient Credit Enhancement: Cash flow scenarios for the notes were satisfactory under Fitch's stresses. At closing, total parity is expected to be 106.02%. Credit enhancement (CE) is provided by overcollateralization (OC) and excess spread. Excess spread will not be released to the issuer until all of the notes are no longer outstanding.
Adequate Liquidity Support: Liquidity support for the series 2014-1 notes is provided by an approximate $0.692 million reserve fund (0.25% of the outstanding notes) and a $500,000 capitalized interest fund, both of which are funded at closing with note proceeds.
Acceptable Servicing Capabilities: Day-to-day servicing will be provided by the Board and Pennsylvania Higher Education Assistance Agency (PHEAA) will act as backup servicer. All servicers have demonstrated adequate servicing capabilities
Since FFELP student loan ABS rely 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 and basis risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults and basis shock beyond Fitch's published stresses could result in future downgrades. Likewise, a buildup of credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades. For further discussion of Fitch's sensitivity analysis, please see the presale titled 'UTAH 2014-1', dated July 17, 2014, available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (June 23, 2014);
--'Representations, Warranties and Enforcement Mechanism in Global Structured Finance Transactions' (April 17, 2012).
Applicable Criteria and Related Research: State Board of Regents of the State of Utah, Series 2014-1 (US ABS)
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions
Global Structured Finance Rating Criteria
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria