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Fitch Affirms Brazos Higher Education Authority Inc. 1993B Indenture Notes; Outlook StableFitch Ratings has affirmed the senior student loan notes issued by Brazos Higher Education Authority, Inc. - Amended and Restated 2004 Indenture Trust (1993B) series 2010-1 at 'AAAsf'. A full list of rating actions follows at the end of this press release. KEY RATING DRIVERS U.S. Sovereign Risk: The trust collateral comprises Federal Family Education Loan Program (FFELP) loans 100% of which are rehab loans, with 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. Fitch's U.S. sovereign rating is currently 'AAA' with a Stable Outlook. Collateral Performance: Fitch assumes a base case default rate of 18.75% and a 56.25% default rate under the 'AAAsf' credit stress scenario. The weighted average claim reject rate is assumed to be 0.25% in the base case and 2% in the 'AAAsf' case. Fitch applies the standard default timing curve, in its credit cash flow analysis. The trailing 12 month (TTM) average constant default rate utilized in the Maturity stress is 3.37%. The TTM levels of deferment, forbearance, Income-based repayment (before adjustment) and constant prepayment rate (voluntary and involuntary) are 6.93%, 9.45%, 13.98% and 11.27% respectively, which are used as the starting point in cash flow modelling. Subsequent declines or increases are modelled as per criteria. The weighted average borrower benefit is assumed to be approximately 0.31% based on information provided by the sponsor. Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this transaction as per criteria. Payment Structure: As of July 2016, senior parity ratio is 111.77%. The class A notes also benefit from subordination provided by the class B notes. Liquidity support is provided by a Debt Service Reserve account sized at its floor of $1,770,900. Maturity Risk: Fitch's student loan ABS (News - Alert) cash flow model indicates that the notes are paid in full on or prior to the legal final maturity dates under the commensurate rating scenario. Operational Capabilities: Day-to-day servicing is provided by Xerox Education Services LLC., Navient Solutions, Inc., Pennsylvania Higher Education Assistance Agency, and Nelnet Servicing. Fitch believes all servicers are acceptable servicers of FFELP student loans given their long servicing history. Criteria Variations: For transactions in surveillance, Fitch will treat certain assets such as claims filed as short-term assets in its cash flow analysis. Given that Fitch's current criteria is silent on the treatment of such assets, this treatment is considered a criteria variation. Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated July 18, 2016, Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness. The definition of eligible investments for this deal does not include Fitch's long-term rating for Commercial Paper that matures in more than 30 days. This represents a criteria variation. Fitch doesn't believe such variation has a measurable impact upon the ratings assigned. 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, basis risk, and loan extension risk account fr 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. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC (News - Alert) RULE 17G-10 No third-party due diligence was provided or reviewed in relation to this rating action Fitch has affirmed the following ratings: Brazos Higher Education Authority 1993B Series 2010 --Class A-1 at 'AAA'; Outlook Stable; --Class A-2 at 'AAA'; Outlook Stable. Additional information is available at www.fitchratings.com. Applicable Criteria Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016) https://www.fitchratings.com/site/re/884963 Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016) https://www.fitchratings.com/site/re/879815 Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015) https://www.fitchratings.com/site/re/875586 Global Structured Finance Rating Criteria (pub. 27 Jun 2016) https://www.fitchratings.com/site/re/883130 Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 26 Jul 2016) https://www.fitchratings.com/site/re/881705 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010984 Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010984 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 (News - Alert) 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. View source version on businesswire.com: http://www.businesswire.com/news/home/20160830006107/en/ |
