NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the senior notes at 'Asf' issued by Iowa Student Loan Liquidity Corporation, Series 2015-A. The Rating Outlook remains Stable for all notes.
KEY RATING DRIVERS
Collateral Quality: As of the March 25, 2016 distribution date, the trust is collateralized by approximately $38.82 million of private student loans and $4.55 of FFELP student loans, which are performing in line with initial expectations. Fitch calculated projected lifetime defaults are in the 11% - 15% range. The FFELP loans have guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest.
Credit Enhancement: CE is provided by overcollateralization (OC; the excess of the trust's asset balance over the bond balance) and excess spread. The parity ratio (total assets to total liabilities) is 128.36%, as of the March 25, 2016 distribution period. Liquidity support is provided by a reserve account sized at 2% of the bond balance (with a floor of 1% of the initial bond balance) and a $1.24 million capitalized interest account, which will step down based upon a predetermined schedule.
Servicing Capabilities: ISL is the servicer of this portfolio, with Pennsylvania Higher Education Assistance Agency (PHEAA) acting as the backup servicer. Fitch views ISLLC and PHEAA as adequate servicers.
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 the FFELP portion of this transaction under both the existing and proposed criteria.
As Fitch's base case default proxy is derived primarily from historical collateral performance, actual performance may differ from the expected performance, resulting in higher loss levels than the base case. This will result in a decline in credit enhancement and remaining loss coverage levels available to the notes and may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
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 buildup 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 rating actions:
Iowa Student Loan Liquidity Corporation, Series 2015-A:
--2015-A 2018 'Asf'; Outlook Stable;
--2015-A 2019 'Asf'; Outlook Stable;
--2015-A 2020 'Asf'; Outlook Stable;
--2015-A 2021 'Asf'; Outlook Stable;
--2015-A 2022 'Asf'; Outlook Stable;
--2015-A 2023 'Asf'; Outlook Stable;
--2015-A 2024 'Asf'; Outlook Stable;
--2015-A 2025 'Asf'; Outlook Stable;
--2015-A 2026 'Asf'; Outlook Stable;
--2015-A 2027 'Asf'; Outlook Stable;
--2015-A 2030 'Asf'; Outlook Stable;
--2015-A 2034 'Asf'; 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)
U.S. Private Student Loan ABS Criteria (pub. 31 Jul 2015)
Dodd-Frank Rating Information Disclosure Form