Fitch Ratings has downgraded the rating of the class A-2 notes of
The Rating Outlook remains Negative. Fitch has also affirmed the ratings of all outstanding classes of
RATING ACTIONS
Entity / Debt
Rating
Prior
A-4 784420AJ0
LT
AAAsf
Affirmed
AAAsf
B 784420AK7
LT
Asf
Affirmed
Asf
A-2 78444QAB8
LT
AAsf
Downgrade
AAAsf
A 78444TAA4
LT
AAAsf
Affirmed
AAAsf
A 78444WAA7
LT
AAAsf
Affirmed
AAAsf
Page
of 1
VIEW ADDITIONAL RATING DETAILS
SLC 2005-2: Both the class A-4 and class B notes passed the credit and maturity stresses for their respective ratings with their Rating Outlooks remaining at current levels. The class B notes do not meet the minimum parity requirement of 101.0% for a 'AAsf' rating per Fitch's FFELP Rating Criteria. The Rating Outlook on the class A-4 notes remains Negative due to the Outlook assigned to the
SLC 2009-1: The class A-2 notes have been downgraded to 'AAsf' from 'AAAsf' due to increased maturity risk in the transaction, resulting from the continued increase in the remaining term and the decrease in the principal payment rate, despite having a legal final maturity date of
SLC 2009-3 and SLC 2010-1: The class A notes in both transactions passed all credit and maturity stresses and are affirmed at 'AAAsf'/Outlook Negative. The Negative Rating Outlooks are due to the Outlook assigned to the
KEY RATING DRIVERS
Collateral Performance: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 13.00%, 24.25%, 23.25% and 30.50% under the base case scenario and a default rate of 39.00%, 72.75%, 69.75% and 91.50% under the '
The TTM levels of deferment, forbearance and income-based repayment (IBR; prior to adjustment) are 2.93%, 9.01% and 17.10% for SLC 2005-2; 5.95%, 19.17% and 27.34% for SLC 2009-1; 5.34%, 14.39% and 24.75% for SLC 2009-3; and 5.46%, 14.67% and 32.31% for SLC 2010-1. These assumptions are used as the starting points in cash flow modeling, and subsequent declines or increases in the above assumptions are modeled as per criteria. The borrower benefit is assumed to be approximately 0.22%, 0.15%, 0.10% and 0.12% for SLC 2005-2, 2009-1, 2009-3 and 2010-1, respectively, based on information provided by the sponsor.
Basis and Interest Rate Risk: Basis risk for these transactions arises from any rate and reset frequency mismatch between interest rate indices for Special Allowance Payments (SAP) and the securities. As of the most recent distribution dates, 99.64%, 92.73%, 99.72% and 96.32% of the student loans in SLC 2005-2, 2009-1, 2009-3 and 2010-1, respectively, are indexed to LIBOR, and the balance of the loans is indexed to the 91-day T-bill rate. All the notes in the four transactions are indexed to three-month LIBOR. Fitch applies its standard basis and interest rate stresses to the transactions as per criteria.
Payment Structure: Credit enhancement (CE) is provided by overcollateralization (OC), excess spread, and for the class A notes of SLC 2005-2, subordination. As of the most recent distribution dates, the senior parity ratio (including the reserve) is 105.15% (4.90% CE) for SLC 2005-2. The total parity ratios are 100.64% (0.63% CE), 112.52% (11.12% CE), 108.04% (7.44% CE) and 216.79% (53.87% CE) for SLC 2005-2, 2009-1, 2009-3 and 2010-1, respectively.
Liquidity Support: Liquidity support is provided by a reserve account currently sized at their floors of
Operational Capabilities: SLC Trusts are the securitizations of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
'AAAsf' rated tranches of most FFELP securitizations will likely move in tandem with the
This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. Fitch conducts credit and maturity stress sensitivity analysis by increasing or decreasing key assumptions by 25% and 50% over the base case. The credit stress sensitivity is viewed by stressing both the base case default rate and the basis spread. The maturity stress sensitivity is viewed by stressing remaining term, IBR usage and prepayments. The results below should only be considered as one potential outcome, as the transactions are exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance.
Current Ratings: class A 'AAAsf'; class B 'Asf';
Current Model-Implied Ratings: class A 'AAAsf'; class B 'AAAsf'.
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAAsf'; class B 'AAAsf';
Default increase 50%: class A 'AAAsf'; class B 'AAAsf';
Basis Spread increase 0.25%: class A 'AAAsf'; class B 'AAAsf';
Basis Spread increase 0.50%: class A 'AAAsf'; class B 'Asf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf';
CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf';
IBR Usage increase 25%: class A 'AAAsf'; class B 'AAAsf';
IBR Usage increase 50%: class A 'AAAsf'; class B 'AAsf';
Remaining Term increase 25%: class A 'AAsf'; class B 'Asf';
Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
Current Rating: class A 'AAAsf';
Current Model-Implied Rating: class A 'AAAsf' (Credit Stress) / 'Asf' (Maturity Stress).
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAAsf';
Default increase 50%: class A 'AAAsf';
Basis Spread increase 0.25%: class A 'AAAsf';
Basis Spread increase 0.50%: class A 'AAAsf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'BBBsf';
CPR decrease 50%: class A 'BBsf';
IBR Usage increase 25%: class A 'Asf';
IBR Usage increase 50%: class A 'Asf';
Remaining Term increase 25%: class A 'Asf';
Remaining Term increase 50%: class A 'BBBsf'.
Current Rating: class A 'AAAsf';
Current Model-Implied Rating: class A 'AAAsf'.
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAAsf';
Default increase 50%: class A 'AAAsf';
Basis Spread increase 0.25%: class A 'AAAsf';
Basis Spread increase 0.50%: class A 'AAAsf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AAAsf';
CPR decrease 50%: class A 'AAAsf';
IBR Usage increase 25%: class A 'AAAsf';
IBR Usage increase 50%: class A 'AAAsf';
Remaining Term increase 25%: class A 'AAsf';
Remaining Term increase 50%: class A 'CCCsf'.
Current Rating: class A 'AAAsf';
Current Model-Implied Rating: class A 'AAAsf'.
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAAsf';
Default increase 50%: class A 'AAAsf';
Basis Spread increase 0.25%: class A 'AAAsf';
Basis Spread increase 0.50%: class A 'AAAsf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AAAsf';
CPR decrease 50%: class A 'AAAsf';
IBR Usage increase 25%: class A 'AAAsf';
IBR Usage increase 50%: class A 'AAAsf';
Remaining Term increase 25%: class A 'AAAsf';
Remaining Term increase 50%: class A 'AAAsf'.
Fitch has revised its global economic outlook forecasts as a result of the war in
Factors that could, individually or collectively, lead to positive rating action/upgrade:
No upgrade credit stress sensitivity or maturity stress sensitivity is provided for the class A and class B notes, as they are already at their highest possible model-implied ratings.
No upgrade credit stress sensitivity is provided for the class A notes, as they are already at their highest possible model-implied rating.
Maturity Stress Sensitivity
CPR increase 25%: class A 'AAsf';
IBR usage decrease 25%: class A 'Asf';
Remaining term decrease 25%: class A 'AAsf'.
No upgrade credit stress sensitivity or maturity stress sensitivity is provided for the class A notes, as they are already at their highest possible model-implied rating.
No upgrade credit stress sensitivity or maturity stress sensitivity is provided for the class A notes, as they are already at their highest possible model-implied rating.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
Additional information is available on www.fitchratings.com
(C) 2022 Electronic News Publishing, source