Fitch Rates Edsouth Indenture No. 9, LLC Series 2015-1

NEW YORK--()--Fitch Ratings has assigned the following ratings for two classes of Edsouth Indenture No. 9, LLC Student Loan Asset-Backed Notes Series 2015-1 (ESA 2015-1):

--$496,500,000 class A notes 'AAAsf'; Outlook Stable;

--$10,300,000 class B notes 'Asf'; Outlook Stable.

The class B notes are subject to an interest cap. Fitch does not rate to any payment of the class B carryover amount.

KEY RATING DRIVERS

Collateral Quality: The trust collateral is comprised entirely of student loans originated under Federal Family Education Loan Program (FFELP). Although the trust consists of approximately 71.19% of Rehabilitated 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 at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED). Fitch currently rates the U.S. 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement (CE): CE is provided by $9,905,829 of overcollateralization (OC) and excess spread. The senior notes also benefit from 2.03% in subordination from the class B notes. At closing, a senior parity of 104.07% and total parity of 101.95% is expected. Cash may be released to the issuer when the target OC, equal to the greater of 2.25% of the adjusted pool balance or $750,000, has been reached. Fitch reviewed transaction cash flows that were stressed at a level commensurate with Fitch's 'AAAsf' rating categories for the senior notes and 'Asf' for the subordinate notes. The cash flow results were satisfactory under all stress scenarios for the senior and subordinate classes of notes.

Adequate Liquidity Support: Liquidity support for the ESA 2015-1 notes is provided by a $13.94 million capitalized interest fund and a $1.25 million debt service reserve fund. The debt service reserve fund requirement will be equal to the greater of 0.25% of the outstanding pool balance and 0.15% of the initial pool balance. The capitalized interest fund balance will step down to approximately $6.97 million on the July 2016 distribution date and any remaining funds will be disbursed as available funds on the July 2017 distribution date. The capitalized interest and debt service reserve fund will be funded at closing with note proceeds.

Acceptable Servicing Capabilities: Great Lakes Educational Loan Services Inc. (GLESI) and Pennsylvania Higher Education Assistance Agency (PHEAA) are the servicers at 61.9% and 38.1%, respectively. Fitch has reviewed the servicing operations of each servicer and believes them to be acceptable servicers of FFELP student loans.

RATING SENSITIVITIES

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 CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Key Rating Drivers and Rating Sensitivities are further described in the presale report titled ' Edsouth Indenture No. 9, LLC, Series 2015-1', dated April 27, 2015 available on www.fitchratings.com, or by clicking on the link.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (March 2015);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (June 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984294

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Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Paul Jiang
Associate Director
+1-212-908-9120
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Paul Jiang
Associate Director
+1-212-908-9120
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com