Fitch Affirms Arkansas Student Loan Authority Series 2012-1; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the senior notes issued by Arkansas Student Loan Authority 2012-1 at 'AAAsf'. The Rating Outlook remains Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is composed of 100% of Federal Family Education Loan Program (FFELP). 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).

Sufficient Credit Enhancement (CE): Cash flow scenarios for the class A notes were satisfactory under Fitch's stresses. Total reported parity is 111.73%. Total CE is provided by overcollateralization (OC), and excess spread. Additionally, this trust is in turbo and no cash will be released until all notes are paid in full.

Liquidity support is provided by a reserve account (0.25% of outstanding notes or $300,000).

Acceptable Servicing Capabilities: Edfinancial Services is the servicer of this trust, with Nelnet acting as back-up servicer. In Fitch's opinion, both servicers are acceptable servicers of FFELP student loans.

Fitch reviewed Arkansas Student Loan Authority 2012-1 using its existing and proposed FFELP ABS criteria, listed below.

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 credit enhancement 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 rating:

Arkansas Student Loan Authority 2012-1:

--Class A at 'AAAsf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 18 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=872755

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

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

Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

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

Related Research

Arkansas Student Loan Authority, Series 2012-1 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751127

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=995255

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=995255

Endorsement Policy

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

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Contacts

Fitch Ratings
Primary Analyst
Victoria Ohorodnyk
Associate Director
+1-212-908-0866
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan
Managing Director
+1-212-908-0156
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Victoria Ohorodnyk
Associate Director
+1-212-908-0866
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan
Managing Director
+1-212-908-0156
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com