MOODY'S ASSIGNED DEFINITIVE RATINGS TO NORTHSTAR 2005-1 TRANSACTION
Approximately $1.0 Billion of Asset-Backed Securities Rated.
New York, October 28, 2005 -- Moody's Investors Service has assigned definitive ratings of Aaa to Student
Loan Asset-Backed Notes, Senior Series 2005-1A-1
through 2005-1A-5, and the rating of A2 to Student
Loan Asset-Backed Notes, Subordinate Series 2005-1B,
issued by NorthStar Education Finance, Inc. ("NorthStar").
The complete ratings actions are as follows:
$193,100,000 Floating Rate Student Loan Asset-Backed
Notes, Senior Series 2005-1A-1, rated Aaa
$118,300,000 Floating Rate Student Loan Asset-Backed
Notes, Senior Series 2005-1A-2, rated Aaa
$227,900,000 Floating Rate Student Loan Asset-Backed
Notes, Senior Series 2005-1A-3, rated Aaa
$210,700,000 Floating Rate Student Loan Asset-Backed
Notes, Senior Series 2005-1A-4, rated Aaa
$250,000,000 Reset Rate Student Loan Asset-Backed
Notes, Senior Series 2005-1A-5, rated Aaa
$20,000,000 Auction Rate Student Loan Asset-Backed
Notes, Senior Series 2005-1B, rated A2
The ratings of the notes are based on the quality of the collateral underlying
the transaction which consists of Federal Family Education Loan Program
("FFELP") student loans, which are indirectly guaranteed for at
least 98% of defaulted principal and accrued interest by the U.S.
Department of Education ("DOE"); the availability of a debt service
reserve account equal to 0.75% of the principal amount of
the notes (with a minimum of $2,500,000) and a Capitalized
Interest Fund which at closing equals $60 million, both of
which enhance the transaction's liquidity; available excess spread;
the experience and expertise of Great Lakes Educational Loan Services,
Inc.(SQ1) as servicer; and the transaction's structure.
In addition, the senior notes are supported by the 4% subordination
of the subordinated notes. Subordination is expected to increase
over time, as no subordinate notes may be redeemed so long as senior
LIBOR notes and senior reset rate notes remain outstanding; and thereafter,
if there are any senior ARS notes outstanding subject to rating agency
FIFTH ISSUANCE UNDER TRUST INDENTURE
The Senior Series 2005-1A-1 through 2005-1A-5
and the Subordinate Series 2005-1B will be issued under the eighth
supplement dated as of October 1, 2005 to the Trust Indenture originally
dated as of November 1, 2000. The Series 2005-1 Notes
are on parity with previously issued Series 2000, 2002, 2004-1
and 2004-2 Senior and subordinate notes, as applicable.
All notes are supported by pledged assets, which consist of FFELP
student loans and amounts on deposit in trust accounts.
TARGETED AMORTIZATION SCHEDULE FOR LIBOR RATE NOTES
The Senior Series 2005-1A-1 through 2005-1A-4
Notes will bear interest based on three-month LIBOR plus a margin.
The Series 2005-1 LIBOR Notes have a targeted amortization schedule
(starting July, 2010) with quarterly payments of interest beginning
in January 30, 2006. If the amount available to distribute
as principal on any quarterly distribution date is less than the scheduled
principal amortization amount, it will not be considered an event
of default. Any shortfall between the scheduled principal amortization
amount and what is actually paid will be added to the principal amount
scheduled to be paid on the next quarterly distribution date.
RESET RATE NOTES
The Senior Series 2005-1A-5 will be reset rate notes.
The interest rate on the notes will be reset from time to time.
The initial reset date is October 28, 2008. During the initial
reset period the notes will bear interest at an annual rate of 4.74%.
At the initial reset rate date, the notes will be remarketed and
the terms of the notes may change; at the reset date, the currency,
coupon and the maturity of the notes will be determined. Moody's
has incorporated in its analysis the probability of failed remarketing.
During the initial reset period, and at any period at which the
reset rate notes bear interest at a fixed rate, the notes will not
receive principal payments until the end of the related reset period;
instead, such principal payments will be deposited into the retirement
account until the next reset date, at which the notes may be redeemed.
While the notes bear interest at floating rate or an auction rate,
the issuer may make principal distributions during any reset period.
AUCTION RATE NOTES CAPPED AT NET LOAN RATE
The Series 2005-1B Notes will bear interest based on auction rates
determined by the auction procedures specified. For each auction
period, the interest rate for the series 2005-1B Notes will
be the least of: (a) the rate determined pursuant to the auction
procedures specified in the transaction documents, (b) the Maximum
Auction Rate, which is based on the 91-day US Treasury Bill
rate for one-year period plus 1.50% (c) the sum of
one-month LIBOR and 1.50%, (d) the Maximum
Interest Rate, which is equal to the lesser of 18% and the
higher rate permitted by law or (e) the Net Loan Rate, during the
Net Loan Rate Period. The Series 2005-1B may also be redeemed
on any auction rate distribution date, in whole or in part,
at a price of par plus accrued interest. However, no subordinate
notes, including the Series 2005-1B Notes, may be redeemed
so long as senior LIBOR notes and senior reset rate notes remain outstanding,
and thereafter, if there are any senior ARS notes outstanding only
after a rating agency confirmation.
STRONG UNDERLYING COLLATERAL
At closing, the pool of student loans, in the amount of approximately
$2.85 billion, consists of FFELP student loans,
which are indirectly guaranteed for at least 98% of defaulted principal
and accrued interest by the DOE. Approximately 60% of the
loans (by principal balance) were identified as loans to students at medical
schools, approximately 20% were identified as loans to students
at Law/MBA schools, and the rest (about 20%) were made to
students at other 4-year or graduate schools. Historically,
loans to students at four-year colleges and graduate schools have
had lower default rates than loans made to students attending two-year
and proprietary schools.
ISSUER AND SERVICER
NorthStar is a Delaware non-stock nonprofit corporation incorporated
in January 2000. NorthStar is recognized as exempt from federal
income taxation under Section 501(c)(3) of the Internal Revenue Code.
NorthStar was formed to carry on the student loan programs started by
NorthStar Guarantee, Inc., a Minnesota nonprofit corporation
recognized as exempt from federal income taxation under Section 501(c)(3)
of the Internal Revenue Code. NorthStar Guarantee, Inc.
was established in 1991 as the State of Minnesota's designated federal
loan guarantor. NorthStar Guarantee, Inc. also provided
loan origination services, loan escrow and loan disbursement services
for lenders and educational institutions.
The student loans are serviced on behalf of NorthStar by Great Lakes Educational
Loan Services, Inc. (rated SQ1 by Moody's) a Wisconsin corporation.
Great Lakes primary business is to service student loans. Great
Lakes was awarded the "Exceptional Performer" designation
by the DOE. As a result, lenders serviced by Great Lakes
are eligible to receive reimbursement on claims for defaulted loans based
upon 100% of the unpaid principal balance plus accrued unpaid interest,
rather than the statutorily set 98%.
For further information visit www.moodys.com
Structured Finance Group
Moody's Investors Service
Structured Finance Group
Moody's Investors Service