Fitch Affirms Arkansas Student Loan Authority Series 2012-1; Outlook Stable
KEY RATING DRIVERS
High Collateral Quality The trust collateral is composed of 100% of Federal Family Education Loan Program (FFELP). 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).
Sufficient Credit Enhancement (CE): Cash flow scenarios for the class A notes were satisfactory under Fitch's stresses. Total reported parity is 111.73%. Total CE is provided by overcollateralization (OC), and excess spread. Additionally, this trust is in turbo and no cash will be released until all notes are paid in full.
Liquidity support is provided by a reserve account (0.25% of outstanding notes or $300,000).
Acceptable Servicing Capabilities: Edfinancial Services is the servicer of this trust, with Nelnet acting as back-up servicer. In Fitch's opinion, both servicers are acceptable servicers of FFELP student loans.
Fitch reviewed Arkansas Student Loan Authority 2012-1 using its existing and proposed FFELP ABS criteria, listed below.
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 credit enhancement 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:
Arkansas Student Loan Authority 2012-1:
--Class A at 'AAAsf'; Outlook Stable.