Approximately $3.44 billon of asset-backed securities affected
New York, February 23, 2022 -- Moody's Investors Service ("Moody's") has affirmed
the ratings on 41 classes of notes in 17 private student loan securitizations
sponsored, administered, and serviced by Navient Solutions,
LLC, a wholly-owned subsidiary of Navient Corporation ("Navient",
Ba3 stable) following the company's recent announcement of a settlement
with state attorneys general to resolve previously disclosed multistate
litigation and investigations. The settlement is subject to court
approvals. The collateral underlying the transactions consists
of private student loans, which are loans the U.S.
government does not guarantee. As part of the settlement with the
state attorneys general, Navient will cancel approximately $1.7
billion of legacy private student loans that were largely originated between
2002 and 2010 to 66,000 borrowers who subsequently defaulted.
The expense to Navient to cancel these loans is approximately $50
million which represents the amount of expected future recoveries of the
charged-off loans. Approximately $194 million of
the cancelled loans are included in the collateral pools for the 17 transactions
subject to this rating action. Because the loans have defaulted,
the amount outstanding on these loans is no longer included in the remaining
pool balance for the transactions.
The complete rating actions are as follows:
Issuer: Navient Private Education Loan Trust 2014-A
Fixed Rate Class A-2A Notes, Affirmed Aaa (sf); previously
on Oct 23, 2014 Definitive Rating Assigned Aaa (sf)
Floating Rate Class A-2B Notes, Affirmed Aaa (sf); previously
on Oct 23, 2014 Definitive Rating Assigned Aaa (sf)
Floating Rate Class A-3 Notes, Affirmed Aaa (sf); previously
on Oct 23, 2014 Definitive Rating Assigned Aaa (sf)
Fixed Rate Class B Notes, Affirmed Aaa (sf); previously on
Apr 12, 2017 Upgraded to Aaa (sf)
Issuer: Navient Private Education Loan Trust 2014-CT
Class B Notes, Affirmed Aaa (sf); previously on Apr 12,
2017 Upgraded to Aaa (sf)
Issuer: Navient Private Education Loan Trust 2015-A
Fixed Rate Class A-2A Notes, Affirmed Aaa (sf); previously
on Jan 22, 2015 Definitive Rating Assigned Aaa (sf)
Floating Rate Class A-2B Notes, Affirmed Aaa (sf); previously
on Jan 22, 2015 Definitive Rating Assigned Aaa (sf)
Floating Rate Class A-3 Notes, Affirmed Aaa (sf); previously
on Jan 22, 2015 Definitive Rating Assigned Aaa (sf)
Fixed Rate Class B Notes, Affirmed Aaa (sf); previously on
Apr 12, 2017 Upgraded to Aaa (sf)
Issuer: Navient Private Education Loan Trust 2015-B
Floating Rate Class A-3 Notes, Affirmed Aaa (sf); previously
on Aug 13, 2015 Definitive Rating Assigned Aaa (sf)
Issuer: Navient Private Education Loan Trust 2016-A
Fixed Rate Class A-2A Notes, Affirmed Aaa (sf); previously
on Feb 4, 2016 Definitive Rating Assigned Aaa (sf)
Floating Rate Class A-2B Notes, Affirmed Aaa (sf); previously
on Feb 4, 2016 Definitive Rating Assigned Aaa (sf)
Fixed Rate Class B Notes, Affirmed Aa2 (sf); previously on
Apr 12, 2017 Upgraded to Aa2 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-B
Class A-3, Affirmed Baa1 (sf); previously on Feb 13,
2018 Downgraded to Baa1 (sf)
Class A-4, Affirmed Baa1 (sf); previously on Feb 13,
2018 Downgraded to Baa1 (sf)
Class B, Affirmed B1 (sf); previously on Mar 21, 2017
Downgraded to B1 (sf)
Class C, Affirmed Caa3 (sf); previously on May 5, 2014
Affirmed Caa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-C
Cl. A-3, Affirmed Baa2 (sf); previously on Apr
21, 2016 Downgraded to Baa2 (sf)
Cl. A-4, Affirmed Baa2 (sf); previously on Apr
21, 2016 Downgraded to Baa2 (sf)
Cl. A-5, Affirmed Baa2 (sf); previously on Apr
21, 2016 Downgraded to Baa2 (sf)
Cl. B, Affirmed B1 (sf); previously on Apr 21,
2016 Downgraded to B1 (sf)
Cl. C, Affirmed Caa3 (sf); previously on May 5,
2014 Affirmed Caa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2004-A
Cl. A-3, Affirmed Aaa (sf); previously on Sep
28, 2021 Upgraded to Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2004-B
Cl. A-3, Affirmed Aaa (sf); previously on May
5, 2014 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Apr
21, 2016 Confirmed at Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2005-A
Cl. A-4, Affirmed Aaa (sf); previously on Mar
21, 2017 Upgraded to Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2005-B
Cl. A-4, Affirmed Aaa (sf); previously on Mar
21, 2017 Upgraded to Aaa (sf)
Cl. B, Affirmed Aa1 (sf); previously on Feb 13,
2018 Upgraded to Aa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-A
Cl. A-5, Affirmed Aaa (sf); previously on Mar
21, 2017 Upgraded to Aaa (sf)
Cl. B, Affirmed Aa1 (sf); previously on Mar 21,
2017 Upgraded to Aa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-B
Cl. A-5, Affirmed Aaa (sf); previously on Mar
21, 2017 Upgraded to Aaa (sf)
Cl. B, Affirmed Aa1 (sf); previously on Feb 13,
2018 Upgraded to Aa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-C
Cl. A-5, Affirmed Aaa (sf); previously on Mar
21, 2017 Upgraded to Aaa (sf)
Cl. B, Affirmed Aaa (sf); previously on Feb 13,
2018 Upgraded to Aaa (sf)
Cl. C, Affirmed Aa3 (sf); previously on Feb 13,
2018 Upgraded to Aa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2007-A
Cl. A-4, Affirmed Aaa (sf); previously on Sep
28, 2021 Upgraded to Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Sep 26,
2019 Upgraded to Aa3 (sf)
Cl. C-1, Affirmed A2 (sf); previously on Feb
13, 2018 Upgraded to A2 (sf)
Cl. C-2, Affirmed A2 (sf); previously on Feb
13, 2018 Upgraded to A2 (sf)
Issuer: SLM Private Education Loan Trust 2010-C
Cl. A-5, Affirmed Aaa (sf); previously on May
5, 2014 Affirmed Aaa (sf)
Issuer: SLM Private Education Loan Trust 2014-A
Fixed Rate Class B Notes, Affirmed Aaa (sf); previously on
Apr 12, 2017 Upgraded to Aaa (sf)
RATINGS RATIONALE
The rating actions are prompted by Navient's expected cancellation
of approximately $194 million in defaulted student loans underlying
the 17 transactions. As described further below, the affirmations
reflect Moody's opinion that the loss of recoveries from the cancelled
loans will have little impact, since the total dollar amounts of
the potential recoveries to be written off are small relative to the remaining
pool balances on the transactions. The actions also reflect the
recent performance of the transactions.
Navient has advised that it interprets certain provisions of the servicing
agreements to allow the servicer to cancel these defaulted loans in connection
with the settlement upon approval by a court. One example cited
by Navient is contained in the servicing agreement for SLM Private Credit
Student Loan Trust 2006-A and states that "Without limiting
the generality of the foregoing, the Servicer is authorized and
empowered to execute and deliver, on behalf of itself, the
Issuer, the Trustee, the Indenture Trustee, and the
Noteholders or any of them, instruments of satisfaction or cancellation,
or partial or full release or discharge, and all other comparable
instruments, with respect to the related Trust Student Loans;
provided, however, that the Servicer agrees that it will (a)
permit any rescission or cancellation of a Trust Student Loan as ordered
by a court of competent jurisdiction or governmental authority or as otherwise
consented to in writing by the Trustee and the Indenture Trustee".
Navient has advised that pursuant to this provision, it expects
to cancel the loan balances once final court approvals of the settlement
have been obtained. Furthermore, Navient has advised that
it does not intend to indemnify the transactions in connection with the
cancelled loans.
Although the cancelled loans defaulted many years ago and a large portion
of their expected recoveries has already been realized by the securitizations,
the cancellation would eliminate additional recoveries, if any,
on the loans, reducing future potential cash collections to the
securitizations. Future recoveries on defaulted student loans are
part of the available funds that can be distributed to noteholders and
help offset the negative impact of future defaults while protecting the
asset base of securitizations.
For SLM Private Credit Student Loan Trust 2003-B and SLM Private
Credit Student Loan Trust 2003-C, whose asset-over-liability
ratios are below 100%, at 83.6% and 81.4%
respectively, the lost recoveries would reduce the cash distribution
to their noteholders. However, the negative impact is insignificant
as the estimated recovery loss is less than 3bps of the outstanding pool
balances for these transactions. In our analysis, we also
assumed no future recoveries on defaulted loans for these two transactions.
All other affected transactions have enhancements at or higher than their
target enhancement level, and incremental loss of recoveries on
the cancelled loans would not impact cash flow to noteholders as the estimated
recovery loss amount for each transaction is smaller than the available
cash amount after regular debt servicing obligations in the distribution
waterfall.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating US Private Student Loan-Backed Securities" published
in November 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1248885.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings of the notes if net losses are lower
than Moody's expects.
Down
Moody's could downgrade the ratings of the notes if net losses are higher
than Moody's expects.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
In rating this transaction, Moody's used a cash flow model
to model cash flow stress scenarios to determine the extent to which investors
would receive timely payments of interest and principal in the stress
scenarios, given the transaction structure and collateral composition.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Natallia Birukova
Associate Lead Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Jinwen Chen
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
