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Rating Action:

MOODY'S RATES EFSI'S STUDENT LOAN ASSET-BACKED NOTES SENIOR SERIES 2005A-1 AND SUBORDINATE SERIES 2005B-1

26 Apr 2005
MOODY'S RATES EFSI'S STUDENT LOAN ASSET-BACKED NOTES SENIOR SERIES 2005A-1 AND SUBORDINATE SERIES 2005B-1

$260.3 Million of Asset-Backed Securities Rated.

New York, April 26, 2005 -- Moody's Investors Service has assigned long-term ratings of Aaa to the Student Loan Asset-Backed Notes, Senior Series 2005A-1, 2005A-2, 2005A-3 and 2005A-4 and A2 to Subordinate Series 2005B-1 (all referred to as EFSI Series 2005 bonds) issued by EFSI Company (EFSI).

The details of the ratings assigned are as follows:

$54,000,000 Student Loan Asset-Backed Notes, Taxable Senior Series 2005A-1, rated Aaa

$54,000,000 Student Loan Asset-Backed Notes, Taxable Senior Series 2005A-2, rated Aaa

$54,000,000 Student Loan Asset-Backed Notes, Taxable Senior Series 2005A-3, rated Aaa

$56,800,000 Student Loan Asset-Backed Notes, Taxable Senior Series 2005A-4, rated Aaa

$41,500,000 Student Loan Asset-Backed Notes, Taxable Senior Series 2005B-1, rated A2

The EFSI Series 2005 bonds are issued in accordance with an Indenture of Trust dated September 1, 2003, and will represent the third issuance by the Corporation under this Indenture.

Moody's said the Aaa ratings on the senior bonds are based on credit enhancement provided by subordination of 15% for the trust estate and a debt service reserve fund in the amount of 1% of the principal amount of bonds outstanding and the potential for excess spread accumulation over the life of the notes. The underlying student loan portfolio consisted of Federal Family Education Loan Program (FFELP) loans which carry a minimum 98% federal guarantee on defaulted principal and accrued interest and identified pools of alternative student loans.

About 84% of the total loan pool is composed of Federal Family Education Loan Program (FFELP), which are of high credit quality based on the minimum 98% federal reinsurance rate on defaulted principal and accrued interest. The remaining balance (16%) is composed of alternative loans that were originated under either The Education Resources Institute, Inc. (TERI) or PNC Bank's University of Pennsylvania (Penn) loan programs. Defaulted alternative loans are not guaranteed by the DOE. The TERI loans benefit from a guaranty provided by TERI (Baa3) that covers 100% of the principal and accrued interest of a defaulted TERI loan. The Penn loans benefit from various forms of credit enhancement that cover the principal and accrued interest amounts on a defaulted Penn loan. The undergraduate Penn loans are 100% guaranteed by the University of Pennsylvania (Aa3) whereas graduate or Wharton loans receive only limited protection from an escrow fund and a pledge account set up to cover defaulted loans from these types of borrowers, both of which are funded by the university.

The school type mix for the entire loan pool is comprised of approximately 54% of loans made to borrowers attending four-year schools; approximately 9% of loans made to borrowers attending two-year schools; and approximately 5%of loans made to borrowers attending proprietary schools. Historically, loans made to borrowers attending four-year schools have had lower default rates than loans made to students attending two-year and proprietary schools. From a liquidity perspective, the portfolio has over 53% of the student loans in repayment. Liquidity risk is further minimized with over 20% of the loans comprised of subsidized Stafford loans which receive interest subsidy payments from the government while the loans are either in-school, grace, or in deferment. And lastly, there is a fully funded 1% debt service reserve account (with a $500,000 floor).

ISSUER AND SERVICERS

EFSI is a non-profit organization under the Texas Non-Profit Corporation Act as described in Section 501(c)(3) of the Code and is exempt from federal income taxation under Section 501(a) of the Code. The loans in the portfolio will be serviced by Brazos Higher Education Service Corporation Inc. (BHESC), a private non-profit corporation organized in 1980. The servicer, BHESC, has entered into a separate FFELP loan subservicing agreements with ACS Education Services, CFS-SunTech Servicing LLC, Great Lakes Educational Loan Services, Inc., PHEAA and Sallie Mae Servicing, all third-party loan servicing companies, for the performance of certain servicing duties for financed student loans held under the Indenture in compliance with the standards and procedures provided for in the Higher Education Act, the Guarantee Agreements and the Servicing Agreements. BHESC also entered into separate alternative loan subservicing agreements with PHEAA and ACS to service the alternative loans in the portfolio.

A pre-sale report is available on www.moodys.com

New York
Linda Stesney
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Swasi Bate
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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