MOODY'S RATES MISSISSIPPI STUDENT LOAN DEAL Aaa AND A2
Moody's Investors Service has assigned ratings of Aaa to the Senior Asset-Backed Notes and A2 to the Subordinate Asset-Backed Notes issued by the Mississippi Higher Education Assistance Corporation. In addition, Moody's has confirmed the ratings of Aaa for the Senior Series 1999-A-1 and 1999-A-2 Student Loan Revenue Bonds, the Senior Series 1999-A-3 Student Loan Asset-Backed Notes, and the rating of A2 for the Subordinate Series 1999-B-1 Student Loan Revenue Bonds.
The complete rating action is as follows:
$72,900,000 Student Loan Asset-Backed Notes, Senior Series 2000-A-1, rated Aaa
$8,100,000 Student Loan Asset-Backed Notes, Subordinate Series 2000-B-1, rated A2
This is the second issuance by the Mississippi Higher Education Assistance Corporation under a trust indenture dated, July 1, 1999. Proceeds will be used by the Corporation to: (i) acquire FFELP student loans from an existing line of credit, (ii) fund a portion of the reserve fund, (iii) capitalize interest on the notes, and (iv) pay certain costs of issuance. Collections on the pool of student loans will be used during the recycling period (which ends March 2005) to acquire new loans. While the recycling period may cause the current stratification of the pool to change over time, Moody's rating includes an assessment of the future acquisitions to the student loan pool. In addition, all student loans acquired during the recycling period are required to meet certain eligibility criteria.
Arthur Heffner, a Moody's associate analyst, said that the ratings on the senior and subordinate asset-backed notes are based on (1) the minimum 98% federal guarantee from the Department of Education on any Federal Family Education Loan Program (FFELP) student loan underlying the transaction, (2) the availability of a reserve fund equal to 2% of outstanding notes, 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, and (4) the high quality of the collateral by loan type and school type. The Aaa rating on the senior notes are also based on the 10% subordination provided by the subordinate obligations.
Interest rates for the Series 2000-A-1 notes and subordinate Series 2000-B-1 notes are determined by auctions held every 28 days. Interest is paid quarterly on the Series 2000-A-1 notes, while subordinate Series 2000-B-1 investors receive interest payments on a monthly basis. Both the senior and subordinate notes have a stated maturity of November 1, 2030.
At closing, the student loans pledged to the trust estate will consist of approximately $152 million of FFELP student loans, which carry an ultimate guarantee of all accrued interest and at least 98% of principal by the Department of Education. Approximately, 90% of the loans were made to borrowers attending four-year schools, who historically default with less frequency than two-year and proprietary school students. The underlying loans are also well seasoned with more than 52% of the obligors in repayment status, which provides additional liquidity protection and contributes to lower cumulative default expectations than unseasoned loans. In addition, more than half of the pool consists of subsidized Stafford loans, which will further enhance the liquidity of the trust due to the government interest subsidy that is received while loans are in school, grace, or deferment status.
The Mississippi Higher Education Assistance Corporation is a nonprofit corporation organized and existing for the purpose of acquiring certain loans under the Federal Family Education Loan Program. The Corporation has received Internal Revenue Service determination letters to the effect that it is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code.
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