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Global Credit Research - 04 Apr 2011
$562 million of asset-backed securities affected
New York, April 04, 2011 -- Moody's Investors Service has assigned provisional ratings of (P)Aaa (sf)
to three classes of senior notes to be issued by SLM Private Education
Loan Trust 2011-A.
Moody's issues provisional ratings in advance of the final sale of securities.
Upon a conclusive review of the final documentation, Moody's will
endeavor to assign final ratings to the securities. Final ratings
may differ from provisional ratings.
The complete rating actions are as follows:
Issuer: SLM Private Education Loan Trust 2011-A
$287,000,000 Floating Rate Class A-1 Notes,
rated (P)Aaa (sf)
$175,000,000 Fixed Rate Class A-2 Notes,
rated (P)Aaa (sf)
$100,000,000 Floating Rate Class A-3 Notes,
rated (P)Aaa (sf)
The Notes will be sold in a privately negotiated transaction without registration
under the Securities Act of 1933 (the Act) under circumstances reasonably
designed to preclude a distribution thereof in violation of the Act.
The issuance has been designed to permit resale under Rule 144A.
The provisional ratings assigned to the Class A Notes is based upon an
expected 20.68% overcollateralization at closing,
a non-declining reserve account that is expected to be fully funded
at closing at 0.25% of the initial loan balance, excess
spread that is expected to be approximately 4% per annum,
based on today's level of interest rates, structural features that
trap excess spread to build the overcollateralization to a target level
of 33%, and a cash capitalization account that is expected
to be fully funded at closing in the amount of $5.82 million.
Moody's cumulative net loss rate expectation is 12% for the private
student loan pool.
The Class A-2 notes are expected to be fixed rate. This
is the first private student loan transaction issued by Sallie Mae to
include unhedged interest rate risk to this extent. The interest
rate risk comes from the fixed rate Class A-2 notes being backed
by underlying loans that are primarily indexed to one month LIBOR.
The other risk in the transaction comes from 9% of the portfolio
that is indexed to the Prime rate. Since the bonds are indexed
to LIBOR, this creates basis risk with this portion of the portfolio.
The transaction is not expected to hedge this risk.
The V Score for this transaction is Medium/High, which is consistent
with the Medium/High V Score assigned for the U.S. Private
Student Loan ABS sector. While the Medium/High score is also consistent
with past Sallie Mae transactions, the transaction complexity sub-category
within the V Score is weaker for this transaction. This is driven
by the unhedged interest rate risk resulting from the Class A-2
notes being fixed rate, while the underlying loans are floating
rate. As a result, the complexity and market value sensitivity
category of the V Score is weaker for this transaction than for past Sallie
Moody's V Scores provide a relative assessment of the quality of available
credit information and the potential variability around the various inputs
to a rating determination. The V Score ranks transactions by the
potential for significant rating changes owing to uncertainty around the
assumptions due to data quality, historical performance, the
level of disclosure, transaction complexity, the modeling
and the transaction governance that underlie the ratings. V Scores
apply to the entire transaction (rather than individual tranches).
Moody's Parameter Sensitivities
If the expected cumulative net loss used in determining the initial rating
for the Class A notes was changed to 15%, 20%,
or 24%, the initial model-indicated output for the
Class A notes would be Aa1, A2 and A3, respectively.
Parameter Sensitivities are not intended to measure how the rating of
the security might migrate over time, rather they are designed to
provide a quantitative calculation of how the initial model output might
change if key input parameters used in the initial rating process differed.
The analysis assumes that the deal has not aged. Parameter Sensitivities
only reflect the ratings impact of each scenario from a quantitative/model-indicated
standpoint. Qualitative factors are also taken into consideration
in the rating process, so the actual ratings that would be assigned
in each case could vary from the information presented in the Parameter
The methodology that was used in rating this transaction is described
in "Moody's Approach to Rating U.S. Private Student Loan-Backed
Securities," published on January 6, 2010. To address
the risk that the A-2 notes are fixed rate, while the underlying
loans are floating rate, we assumed current LIBOR rates of 0.26%
for the life of the transaction in our Aaa cashflow analysis. We
also assumed in our Aaa cashflow analysis that the spread between Prime
and LIBOR is 150 bp. This was to address the risk of approximately
9% of the loans being indexed to Prime, while the bonds are
either fixed rate or indexed to LIBOR.
Moody's Investors Service did not receive or take into account a
third Party due diligence report on the underlying assets or financial
instruments in this transaction.
Additional research, including a pre-sale report for this
transaction will be available at www.moodys.com.
The special report "V Scores and Parameter Sensitivities in the U.S.
Student Loan ABS Sector," is also available on moodys.com.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service's information, confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer satisfactory for the purposes of assigning a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
Barbara A. Lambotte
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns provisional ratings of (P)Aaa (sf) to SLM Private Education Loan Trust 2011-A
250 Greenwich Street
New York, NY 10007
No Related Data.
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