NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the senior notes at 'AAAsf' issued by Montana Higher Education Student Assistance Corp, 1993 Master Trust. The Rating Outlook remains Stable for all notes.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% Federal Family Education Loan Program (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 reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of January 2016, parity is at 106.81%. Additionally, the trust is in turbo and no cash will be released until all notes have been paid in full.
Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund currently sized at $9,579,540 (1% of the bond balance, with a floor of $7,343,420)
Acceptable Servicing Capabilities: Day-to-day servicing will be provided by Student Assistance Foundation of Montana (with PHEAA acting as back-up servicer). Both servicers have demonstrated adequate servicing capabilities.
On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria.
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, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors 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
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
Montana Higher Ed Student Assistance Corp, 1993 Master Trust:
--2005-B at 'AAAsf'; Outlook Stable;
--2006-A at 'AAAsf'; Outlook Stable;
--2012 A-2 at 'AAAsf'; Outlook Stable;
--2012 A-3 at 'AAAsf'; Outlook Stable.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 04 Dec 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)
Montana Higher Education Student Assistance Corporation Senior Series 2012-A -- Appendix
Dodd-Frank Rating Information Disclosure Form