MOODY'S ASSIGNS Aaa RATINGS TO 4 CLASSES OF MISSOURI HIGHER EDUCATION LOAN AUTHORITY - STUDENT LOAN REVENUE BONDS
New York, 02-05-97 -- Moody's Investors Service has assigned Aaa ratings to four series of senior student loan revenue bonds issued by Missouri Higher Education Loan Authority (Mohela). In conjunction with the sale of the new debt, the ratings were also confirmed on the existing parity debt and the A2 was confirmed on Mohela's existing subordinate bonds.
The ratings are based on the following factors: (1) A minimum of 97% of the student loan portfolio comprises loans originated under the Federal Family Education Loan Program (FFELP), which provides an ultimate guarantee from the Department of Education (DOE) at 98% or 100% (depending on the date of the loan origination) on defaulted principal and interest; (2) a debt service reserve fund of 2% of the outstanding bond principal; and (3) overcollateralization of 3% that will be created from excess spread.
The complete rating action is as follows:
Issuer: Missouri Higher Education Loan Authority
$35,000,000 Student Loan Revenue Bonds, Senior Series 1997L: Taxable Auction Rate, rated Aaa
$15,650,000 Student Loan Revenue Bonds, Senior Series 1997M: Taxable Auction Rate, rated Aaa
$14,555,000 Student Loan Revenue Bonds, Senior Series 1997N: Tax-exempt Fixed Rate, rated Aaa
$9,795,000 Student Loan Revenue Bonds, Senior Series 1997O: Tax-exempt Fixed Rate, rated Aaa
STRONG COLLATERAL WITH FAVORABLE SEASONING
The student loans pledged to the trust estate pledge consist of $233 million of loans, with approximately $24 million to be acquired from a separate trust estate administered by Mohela, shortly after closing. According to Cynthia Shapiro, a senior analyst at Moody's, the quality of the student loans pledged to bond holders is good. The existing loan portfolio carries a minimum guarantee of 98% under FFELP, with more than 68% Stafford loans. The seasoning of the portfolio is favorable; 65% in repayment and less than 10% currently in school status.
The remaining $50 million of bond proceeds will be used to acquire student loans through February 1, 1998. It is expected that $10 million of the prefunding will be used to acquire supplemental loans, which are not FFELP and do not carry a guarantee from the DOE. The supplemental loans will rely on the creditworthiness of the borrower as the source of repayment of the loan. The acquisition of supplemental loans will not significantly alter the mix of student loans pledged to bond holders, as their acquisition is limited to 5% of the Series 1996 and the current Series 1997 bonds, which results in less than 3% of bonds outstanding under the trust estate.
Excess principal and interest receive from the student loans is used to purchase additional student loans through July 1, 2002.
INTEREST ON THE 1997 M AND O BONDS IS PAYABLE EVERY 28 DAYS
Interest on the Senior Series 1997 L and M bonds is established by an auction every 28 days, paying interest the day after the end of the interest period. The 1997 taxable auction rate bonds are subject to a maximum of the lesser of the maximum auction rate (91 day Treasury bill rate plus 1.2% for Aaa rated bonds) and the interest rate limitation, 17%. The auction rate bonds are subject to redemption on any date at 100% of principal plus accrued interest.
The Senior Series 1997 N and O bonds are fixed rate and accrue interest to be disbursed on February 15 and August 15 of each year. The 1997 O bonds are subject to optional redemption on or after February 15, 2007, at 101% of principal through February 14, 2008, and 100% thereafter. The 1997 N bonds are not subject to redemption prior to maturity.
Mohela is a public instrumentality and body corporate and politic of the state of Missouri. Mohela was organized in 1981 for the purpose of assuring that all eligible post-secondary education students have access to guaranteed student loans. In 1994, Mohela's powers were expanded to include loan financing, loan origination, loan servicing, and the acquisition of both student loans insured under the Higher Education Act of 1965 and alternative student loans. Mohela currently has 150 full-time employees performing loan servicing and administrative functions.
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