NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has placed Vermont Student Assistance Corp. (VSAC) - 1995 Bond Resolution on Rating Watch Evolving, as a result of a the pending restructuring of the trust in conjunction with VSAC's 2013-1 Federal Family Education Loan Program (FFELP) issuance.
VSAC anticipates completing a securitization on June 25, 2013 (VSAC 2013-1) of FFELP loans that are currently pledged to Straight-A, the VSAC 2008 trusts, and the VSAC 1995 trust.
At the closing of the VSAC 2013-1 transaction, approximately $58 million in FFELP student loans is expected to be removed from the VSAC 1995 trust, and the proceeds will be used to redeem some taxable and tax-exempt bonds from the same trust. Additionally, VSAC 2013-1 has an option to purchase an additional $10 million of FFELP student loans out of the 1995 trust within 30 days after the closing.
VSAC 1995 trust is currently backed by 76% FFELP and 24% private student loans as of March 31, 2013. After the restructuring, the trust will be backed by a higher proportion of private student loans. In addition, VSAC is planning to release excess cash out of the 1995 trust. Total parity as of the last distribution was 107.48%. Fitch expects to resolve the rating watch evolving when we are provided with the collateral composition and bond information post restructuring.
For private student loan ABS, 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 credit enhancement (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.
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.
Please see the attached Rating Action Report for a list of rating actions.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' dated May 24, 2013;
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated May 17, 2013;
--'U.S. Private Student Loan ABS Criteria' (Jan. 29, 2013).
Applicable Criteria and Related Research: Fitch Places Vermont Student Assistance Corp. - 1995 Bond Resolution on Rating Watch Evolving
Global Structured Finance Rating Criteria
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended
U.S. Private Student Loan ABS Criteria
- Security Upgrades & Downgrades
- Fitch Ratings
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