Fitch Upgrades SLM Student Loan Trust 2013-2 Sub Notes
KEY RATING DRIVERS
High Collateral Quality: The collateral consists 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 reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch currently rates the U.S. sovereign 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement (CE): While both the senior and subordinate notes will benefit from overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread, the senior notes also benefit from subordination provided by the class B note. As of January 2015, total parity is 101.01% (1.00% CE) and senior parity is 104.64% (4.44% CE). Cash is being released from the trust given that the target OC level of the greater of 1.00% of the adjusted pool balance and \$2,000,000 has been maintained. The subordinate notes have been upgraded to 'AAsf' from 'A+sf' to reflect the trust's ability to pass the respective rating's cash flow stresses.
Adequate Liquidity Support: Liquidity support is provided by a Debt Service Reserve Fund sized at the greater of 0.25% of the pool balance and \$1,248,458.
Acceptable Servicing Capabilities: Navient, formerly Sallie Mae, Inc., is responsible for day-to-day servicing of the trust. Fitch believes Navient is an acceptable servicer of FFELP student loans.
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 CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.
Initial Key Rating Drivers and Rating Sensitivity further described in the presale report published on April 2, 2013.
Fitch has taken the following rating actions:
SLM Student Loan Trust 2013-2:
--Class A notes affirmed at 'AAAsf'; Outlook Stable;
--Class B notes upgraded to 'AAsf' from 'A+sf'; Outlook Stable.
A comparison of the transaction's RW&Es to those of typical RW&Es for student loans is available by accessing the reports and links below:
--'SLM Student Loan Trust 2013-2 - Appendix', dated April 2, 2013;
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended', dated April 17, 2013.