Fitch Affirms Vermont Student Assistance Corp Series 2013-1; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed the senior student loan notes at 'AAAsf' and the subordinate student loan notes at 'Asf' issued by Vermont Student Assistance Corp Series 2013-1. The Rating Outlook on the notes is Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral is comprised of 100% of 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 at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED). Fitch currently rates the U.S. 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of the Feb. 2016 collection period, reported senior and total parity was 105.5% and 102.2%, respectively. Additionally, the trust is in turbo and will not release any cash until all notes have been paid in full.
Adequate Liquidity Support: Liquidity support is provided by reserve account sized at 0.25% of outstanding notes with a floor of $560,543.
Acceptable Servicing Capabilities: VSAC will be the servicer and administrator, and Nelnet Servicing LLC (Nelnet) will be the backup servicer for the transaction. Fitch has reviewed the servicing operations of VSAC and Nelnet and believes them to be acceptable servicers of FFELP student loans.
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 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 ratings:
Vermont Student Assistance Corp Series 2013-1:
--Class A at 'AAAsf'; Outlook Stable;
--Class B at 'Asf'; Outlook Stable.