MOODY'S RATES ACCESS TO LOANS FOR LEARNING STUDENT LOAN CORPORATION DEAL Aaa
Moody's Investors Service has assigned a Aaa rating to the Senior Series IV-A-3 Student Loan Program Revenue Bonds issued by Access to Loans for Learning Student Loan Corporation. In conjunction with this sale, Moody's has confirmed the Aaa ratings on the outstanding Senior Series IV-A-1 and Senior Series IV-A-2 Student Loan Program Revenue Bonds and the A2 rating on the outstanding Subordinate Series IV-C-1 Student Loan Program Revenue Bonds.
The complete rating action is as follows:
$35,000,000 Student Loan Program Revenue Bonds, Senior Series IV-A-3, rated Aaa.
Arthur Heffner, a Moody's associate analyst, said that the Aaa rating on the Senior Series IV-A-3 bonds are based on (1) the high quality Federal Family Education Loan Program (FFELP) loan portfolio, which carry a 98% federal guarantee on defaulted principal and interest, (2) the availability of a debt service reserve fund equal to 1% of outstanding bond principal, which provides credit enhancement and liquidity for the transaction, (3) the potential for excess spread accumulation within the trust estate over the life of the bonds, (4) and approximately 21% of subordination provided by previously issued subordinate and unrated junior subordinate bonds.
BOND DETAILS
The Senior Series IV-A-3 bonds are tax-exempt Reset Auction Mode Securities that will bear interest for an initial period at the rate provided for in the Indenture and thereafter at an auction rate based on a 35-day auction period with a maximum interest amount of 17%. Interest will be payable semiannually on each January 1 and July 1, commencing January 1, 2001, until maturity or earlier redemption. The bonds have a stated maturity of July 1, 2035.
TRANSACTION STRUCTURE
The Senior Series IV-A-3 bonds are being issued under a Trust Indenture, dated May 1, 1998, as supplemented by a Third Supplemental Indenture, dated July 1, 2000. This issuance will be cross-collateralized with the previously issued Senior Series IV-A-1, Senior Series IV-A-2, Subordinate Series IV-C-1, and the unrated Junior Subordinate IV-D-1and IV-D-2 bonds. The bond proceeds will be used (i) to originate, finance or otherwise acquire eligible loans, (ii) to fund a reserve account, and (iii) to pay the costs of issuing the bonds.
UNDERLYING COLLATERAL
The student loans pledged to the trust estate consist entirely of FFELP student loans, of which approximately 66% of the portfolio consists of Subsidized Stafford loans. Compared to many other securitized student loan pools, this pool is extremely well seasoned, with approximately 87% of the loans in repayment status, which reduces liquidity risk. In addition, 79% of the portfolio consists of loans originated to students attending four year schools which historically have had a lower default frequency than loans underwritten to students attending two year schools and proprietary schools.
SERVICER RISK
Servicer quality is important in all FFELP student loan transactions because failure to comply with federal servicing guidelines may result in the rejection of a claim submitted for reimbursement.
AFSA Data Corporation ("AFSA") and Sallie Mae Servicing Corporation ("Sallie Mae") will service all or a majority of the loans in the underlying portfolio. As a result, Moody's believes that the transaction's servicing risk is low based on the extensive experience and expertise of the AFSA and Sallie Mae to service the loans in accordance with federal servicing guidelines, which are necessary to maintain the federal guarantee.
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