Fitch Affirms Brazos Student Fin Corp 1998 Indenture Sub Class B Notes; Outlook Revised to Negative
Brazos Student Finance Corporation Student Loan Asset-Backed Notes:
--Class 1998 B-1 at 'Asf'; Outlook revised to Negative from Positive;
--Class 2001 B-1 at 'Asf'; Positive Outlook maintained.
The Outlook revision is due to Fitch's belief that the class 1998 B-1 outstanding notes carry a heightened level of extension risk given the slower repayment of principal than the class 2001 B-1 notes. Based on Fitch's cash flow modelling runs, the notes were not paid in full by their legal final maturity date on June 1, 2023 in a stressed scenario, while class 2001 B-1 was paid timely given their faster principal repayment as well as their longer legal final maturity date of July 1, 2036. Under such scenarios, this may result in technical defaults, although Fitch would expect ultimate repayment of full principal and interest afterwards.
KEY RATING DRIVERS
Adequate Collateral Quality: BSFC 1998 is collateralized by \\$23.18 million of private student loans and \\$20.84 million of FFELP 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 for the FFELP loans. The current rating of the U.S is 'AAA', Outlook Stable. The projected remaining defaults for the private student loans are expected to range between 15%-20% using proxy data. A recovery rate of 15% was applied which was determined to be appropriate based on data provided by the issuer.
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 June 2015, parity is 132.12% (24.31% CE). The trust is in turbo and has not been releasing cash.
Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund currently sized at the greater of 2.00% of the pool balance and \\$1 million. As of June 2015, the reserve account balance is \\$1 million.
Acceptable Servicing Capabilities: Day-to-day servicing is provided by Navient Solutions LLC (formerly known as Sallie Mae, Inc.), Xerox Education Services LLC (Xerox-ES), AES, a servicing division of Pennsylvania Higher Education Assistance Agency (PHEAA), and Nelnet Servicing. Fitch believes these servicers to be acceptable servicers of FFELP and private student loans.
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 CE 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. Fitch will continue to monitor the performance of the trust.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.