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PLEASE READ AND SCROLL DOWN!

 

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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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

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Announcement:

Moody's: No negative ratings impact on Mississippi student loan trusts from loan pool index change to one-month LIBOR

28 Mar 2012

New York, March 28, 2012 -- Moody's announced today that student loan index change to one-month LIBOR from three-month financial commercial paper (CP), pursuant to the Supplemental Indentures, dated March 15, 2012 and effective March 27, 2012, would not, , in and of itself, result in the reduction or withdrawal of the outstanding ratings assigned to student loan bonds (the "Bonds") issued by Mississippi Higher Education Assistance Corporation Trusts ("Affected Transactions") at this time

After the index change, the Department of Education will calculate special allowance payments (SAP) on the basis of a one-month LIBOR, instead of the CP index used currently. This is credit positive for LIBOR- indexed liabilities because it reduces basis risk in that there are fewer sources of potential volatility between the two tenors of one index (three-months versus one-month) than between two different indices (LIBOR versus CP). For treasury-indexed liabilities, the impact is neutral in that the change in the index of the loans does not affect the average basis spread because the average spread from 1971 to the end of 2011 between one-month LIBOR and three-month CP has been similar. (See Index Change Is Credit Positive for FFELP Student Loan ABS published 9 January 2012)

The change is being made pursuant to the Consolidated Appropriations Act, 2012, which allows holders of federally insured student loans under the Federal Family Education Loan Program (FFELP) to permanently change the interest rate index on the loans they own to one-month LIBOR from CP, starting on 1 April 2012.

Senior bonds issued by Mississippi Higher Education Assistance Corporation (1999 Indenture) will remain on review for possible downgrade following a watch-listing action on 17 October 2011. That review was prompted by the negative excess spread generated by the Bonds and the amount of overcollateralization and cash in the trust accounts not providing the notes with sufficient protection against the negative excess spread. Furthermore, in the stress cash flow scenario the senior bonds may stop receiving principal payment early in the cash flow which could further decrease parity levels.

All Bonds issued by Mississippi Higher Education Assistance Corporation (2004 Indenture) will remain on review for possible downgrade following a rating action on 12 February 2012. The review was prompted by discovery of an input error that had occurred during the previous downgrades of the subordinate bonds on December 5, 2008 from A2 to Caa1.

Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have significant effect on yield and/or other payments to investors. This press release should not be taken to imply that there will be no adverse consequence for investors since in some cases such consequences will not impact the rating.

AFFECTED TRANSACTIONS:

Education Services Foundation 1996-01

Mississippi Higher Education Assistance Corporation (1999 Indenture)

Mississippi Higher Education Assistance Corporation (2004 Indenture)

RATING METHODOLOGY

In rating securitizations backed by student loans originated under the Federal Family Educational Loan Program (FFELP), Moody's assesses both the liquidity and credit risk of the transaction. The drivers that affect the performance of a transaction include defaults, servicer guarantee rejection rates, voluntary prepayments, basis risk, borrower benefit utilization, and the number of borrowers in non-repayment status, such as deferment and forbearance.

As part of our analysis to understand the risk of the underlying collateral, we examine historical FFELP static pool performance data. To the extent that performance data is available from a specific issuer, that information is used to arrive at our cash flow assumptions for that particular issuer. If an issuer's data are either limited or unavailable, our assumptions are based on FFELP performance data received from other participants. Although FFELP loans are a standardized asset, we will assume additional volatility in certain assumptions for those issuers that have limited or no data.

In addition, historical interest rates and spreads are analyzed to evaluate the basis risk between the interest rate to which the bonds are indexed and the interest rate to which the FFELP loans are indexed.

This historical data is used to derive an expected, or most likely, outcome for each variable. These expected defaults, prepayments, interest rates, and other assumptions are then stressed in accordance with the rating categories requested by the issuer. Factors that influence the stress levels include the availability of relevant issuer-specific performance data, the seasoning of the loans, collateral concentrations (school types, loan programs), the financial strength and stability of the servicer, and the general economic environment.

These stressed assumptions are then incorporated into a cash flow model that takes into account the FFELP loan characteristics as well as structural (e.g., starting parity, cash flow waterfall, bond tranching, etc.) and pricing features of the transaction. The cash flow model outputs are analyzed to determine whether the transaction as structured by the issuer has sufficient credit protection to pay off the bonds by their legal final maturity dates. We also analyze the liquidity risk of the transaction given that borrowers can be in non-repayment status while in school, grace, deferment or forbearance status, and the transaction can experience delays in default reimbursement and other payments.

On November 18, 2009, Moody's updated its methodology to incorporate an additional assessment of the risk posed by slow loan repayment rates when analyzing bonds that are backed by FFELP student loans. We have recently observed a considerable decline in actual repayment rates of securitized FFELP student loan pools across issuers. The risk posed by slow loan repayment rates is most pronounced for transactions with negative excess spread, which have become more common in the past two years. Under the updated methodology, the cash flows of the transaction must be sufficient to make full and timely payments to investors in a new repayment stress scenario in which the combination of voluntary prepayments, defaults, forbearance rates, and deferment rates results in a total repayment rate that is considerably lower than our existing stress scenarios.

The rating agency condition for Affected Transactions was assigned in line with Moody's existing methodology described above. Moody's noted that on January 18th, 2011, it released a Request for Comment, in which Moody's has requested market feedback on potential changes to its rating methodology for FFELP securities.

Further information on Moody's analysis of these transactions is available on www.moodys.com. Methodologies and factors that may have been considered in the process of rating this deal can be found in the Rating Methodologies sub-directory on Moody's website.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

Aleksandra Simanovsky
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Barbara A. Lambotte
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's: No negative ratings impact on Mississippi student loan trusts from loan pool index change to one-month LIBOR
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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