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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Rating Action:

MOODY'S RATES NORTHSTAR STUDENT LOAN DEAL Aaa and A2

30 Dec 2004
MOODY'S RATES NORTHSTAR STUDENT LOAN DEAL Aaa and A2

$1 billion of Asset-Backed Securities Rated.

New York, December 30, 2004 -- Moody's Investors Service has assigned ratings of Aaa to Student Loan Asset-Backed Notes, Senior Series 2004-2A-1 through 2004-2A-4 , and A2 to Student Loan Asset-Backed Notes, Subordinate Series 2004-2B, issued by NorthStar Education Finance, Inc. ("NorthStar").

The complete ratings actions are as follows:

Issuer: NorthStar Education Finance, Inc.

$295,000,000 Floating Rate Student Loan Asset-Backed Notes, Senior Series 2004-2A-1, rated Aaa

$150,000,000 Floating Rate Student Loan Asset-Backed Notes, Senior Series 2004-2A-2, rated Aaa

$280,000,000 Floating Rate Student Loan Asset-Backed Notes, Senior Series 2004-2A-3, rated Aaa

$249,500,000 Floating Rate Student Loan Asset-Backed Notes, Senior Series 2004-2A-4, rated Aaa

$25,500,000 Auction Rate Student Loan Asset-Backed Notes, Subordinate Series 2004-2B, rated A2

RATING RATIONALE

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 a minimum of 98% of defaulted principal and accrued interest by the U.S. Department of Education ("DOE"); the availability of a debt service reserve account in the amount of 0.75% of the principal amount of the notes (with a minimum floor of $1,000,000) and a Capitalized Interest Fund which at closing will be equal to $35 million - both of which enhance the transaction's liquidity; available excess spread; the experience and expertise of Great Lakes Educational Loan Services, Inc. as servicer; and the transaction structure. In addition the senior notes are supported by the 4% subordination provided by the subordinated notes. Subordination is expected to increase over time, as no subordinate notes may be redeemed so long as there are any Senior Series outstanding (unless a rating agency confirmation is obtained).

FORTH ISSUANCE UNDER TRUST INDENTURE

The Senior Series 2004-2A-1, Senior Series 2004-2A-2, Senior Series 2004-2A-3 and Senior Series 2004-2A-4 (collectively, the "Senior Series 2004-2A Notes") and the Subordinate Series 2004-2B (together with the Senior Series 2004-2A Notes, the "Series 2004-2 Notes") will be issued under a seventh supplement dated as of December 1, 2004 to the Trust Indenture originally dated November 1, 2000. The Series 2004-2 Notes are on parity with previously issued Series 2000, 2002 and 2004-1 senior and subordinate notes, as applicable. All the 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 Series 2004-2A Notes will bear interest based on three-month LIBOR plus a margin. The Series 2004-2A Notes include a targeted amortization schedule (starting October, 2008) with quarterly payments of interest beginning in April 28, 2005. 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. If noteholders receive the targeted amortization amount on each scheduled payment date, the Series 2004-2A-1 notes will be paid in full by April 28, 2014, the Series 2004-2A-2 notes will be paid in full by July 28, 2015, the Series 2004-2A-3 notes will be paid in full by July 28, 2017 and the Series 2004-2A-4 notes will be paid in full by July 28, 2020. The Series 2004-2A Notes can also be optionally redeemed in full on any quarterly distribution date on or after the date on which the targeted balance on such series is expected to be zero, at a price of par plus accrued interest.

AUCTION RATE NOTES CAPPED AT NET LOAN RATE

The Series 2004-2B Notes will bear interest based on auction rates determined by the auction procedures specified in the transaction documents. For each auction period, the interest rate for the series 2004-2B Notes will be the lesser 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 a one-year period plus a margin ranging from 1.2% to 1.75% (based on a rating grid), (c) the sum of one month LIBOR plus 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 2004-2B 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 2004-2B Notes, may be redeemed so long as there are any senior notes outstanding under the Trust Indenture unless a rating agency confirmation is obtained.

STRONG UNDERLYING COLLATERAL

At closing, the pool of student loans, in the amount of approximately $2.3 billion, consisted of FFELP student loans, which are indirectly guaranteed for a minimum of 98% of defaulted principal and accrued interest by the DOE. Approximately 63% of the loans (by principal balance) were identified as loans made to students at medical schools, approximately 21% were identified as loans made to students at Law/MBA schools, and the remaining 16% were identified as loans 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 non-profit 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 non-profit 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. ("Great Lakes") a Wisconsin corporation. Great Lakes' primary business is to service student loans. In June 2004, Great Lakes received 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%. NorthStar have agreed that so long as Great Lakes retains "Exceptional Performer" status, NorthStar will pay Great Lakes an additional servicing fee equal to 0.50% of claim payments that the guarantee agencies make to NorthStar on defaulted student loans. Nevertheless, Great Lakes could lose its "Exceptional Performer" designation as a result of a variety of factors, including changes to the Higher Education Act and/or if future audits indicate that the DOE standards have not been maintained.

For further information visit 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
Giyora Eiger
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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