Fitch Affirms Brazos Student Finance Corp., 2003 Indenture of Trust, Series 2003; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the senior notes at 'AAAsf' and the subordinate notes at 'BBBsf', issued by Brazos Student Finance Corporation, 2003 Indenture of Trust, student loan asset-backed notes, series 2003 (BSFC 2003). The Rating Outlook remains Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised of 82.90% of Federal Family Education Loan Program (FFELP) loans and loans originated under the Health Education Assistance Loan Program (HEAL), as well as 17.10% private student loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees of the FFELP and HEAL loans 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.

The projected remaining defaults as a percent of the current pool balance on the private student loans are expected to range between 7% and 10% using proxy data. A recovery rate of 15% was applied, which was determined to be appropriate based on data provided by the issuer.

Sufficient Credit Enhancement: Credit enhancement (CE) is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of March 31, 2015, total parity was 105.85% (5.53% CE) and senior parity was 116.42% (14.10% CE); however, Fitch only gives credit up to the 109% senior parity and 103% total parity cash release level.

Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund sized at the greater of 1.00% of the outstanding note balance and $500,000.

Acceptable Servicing Capabilities: American Education Services, Inc. (AES), a servicing division of the Pennsylvania Higher Education Assistance Agency (PHEAA), Navient Solutions, Inc. (Navient), Great Lakes Education Loan Services, Inc. (Great Lakes), Xerox Education Services (Xerox-ES), and Nelnet, as sub-servicers, are responsible for the day-to-day servicing of this trust. Fitch believes AES, Navient, Xerox-ES, Great Lakes and Nelnet to be acceptable servicers of FFELP and private student loans.

RATING SENSITIVITIES

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

DUE DILIGENCE USAGE

Fitch was not provided due diligence information from any third parties relating to BSFC 2003.

Fitch affirms the following ratings:

Brazos Student Finance Corporation, 2003 Indenture of Trust student loan asset-backed notes:

-- Series 2003 A-3 at 'AAAsf'; Outlook Stable;

-- Series 2003 A-4 at 'AAAsf'; Outlook Stable;

-- Series 2003 B-1 at 'BBBsf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)

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

U.S. Private Student Loan ABS Criteria (pub. 29 Jan 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=730956

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=988700

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988700

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@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
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com