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Rating Action:

Moody's assigns provisional ratings to Education Loan Asset-Backed Trust I, Series 2013-1

Global Credit Research - 15 Nov 2013

Approximately $878.0 million of asset-backed securities rated

New York, November 15, 2013 -- Moody's Investors Service has assigned provisional ratings of (P)Aaa (sf) to the Series 2013-1 Senior notes and (P)Aa1 (sf) to the Series 2013-1 Subordinate notes issued by Education Loan Asset-Backed Trust I (2003 Indenture). The underlying collateral consists of Federal Family Education Loan Program (FFELP) student loans.

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: Education Loan Asset-Backed Trust I (2003 Trust Indenture)

$493,000,000 Series 2013-1 A1 Senior Notes-1, Assigned (P)Aaa (sf)

$324,000,000 Series 2013-1 A2 Senior Notes, Assigned (P)Aaa (sf)

$61,000,000 Series 2013-1 B1 Subordinate Notes, Assigned (P)Aa1 (sf)

RATINGS RATIONALE

The ratings are based on the underlying collateral, which consists of Federal Family Education Loan Program (FFELP) non-consolidation student loans, which are indirectly guaranteed by the U.S. Department of Education for a minimum of 97% of defaulted principal and accrued interest; the overcollateralization of the trust, which is expected to have an initial parity level of 101.5%; a reserve fund, which is expected to be the greater of 1.00% of the notes outstanding and $1.25 million; and excess spread that is expected to average between 0.60% and 0.90% per annum that is trapped to a target overcollateralization level of the greater of a senior parity level of 107.0%, total parity level of 101.5% and $6.0 million; as well as the expertise and experience of Pennsylvania Higher Education Assistance Agency and XEROX-ES as servicers for this transaction. The Class A notes are further expected to benefit from the 5.4% subordination provided by the Class B notes.

The underlying collateral for the series 2013-1 notes is expected to consist of up to approximately 10% of rehabilitated FFELP loans. We expect rehabilitated FFELP loan pools to experience a higher net loss rate compared with non-rehabilitated FFELP loan pools because although the rehabilitated loans benefit from the same degree of federal guarantee, they are expected to default at a significantly higher rate than non-rehabilitated loans. The expected net loss for the ELAB 2013-1 transaction is approximately 0.23%.

V Score

The V Score for this transaction is Medium, which is lower than the Medium/High V Score assigned for the U.S. FFELP Backed ABS (issued out of Master Trusts) sector. The lower V Score is driven by the better securitization disclosure compared to the sector.

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

For the transaction, if the basis risk in our stressed assumptions were to be changed to +100, +200 or +365 basis points, the initial model-indicated output for the Senior notes would be Aaa, Aaa, and Aa1 respectively.

For the transaction, if the basis risk in our stressed assumptions were to be changed to +100, +185 or +190 basis points, the initial model-indicated output for the Subordinate notes would be Aa1, Aa2, and >A3 respectively.

This transaction is less sensitive to basis risk than other transactions because the auction rate securities have maximum rate caps which limit the amount of interest paid when basis risk increases and because the 2013-1 notes will be paid prior to the auction rate securities.

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 Sensitivity analysis.

RATING METHODOLOGY

The principal methodology used in this rating was "Moody's Approach to Rating Securities Backed by FFELP Student Loans" published in April 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The 2013-1 notes are exposed to fixed-floating interest rate risk because the trust has entered into a fixed to floating rate swap. The trust pays a fixed rate but receives one-month LIBOR rate. We address this risk by testing different interest rate scenarios than are document in our methodology. For more information, please see the pre-sale report.

A pre-sale report is 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.

REGULATORY DISCLOSURES

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments in this transaction.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF332723

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Pedro Sancholuz Ruda
Asst Vice President - 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

Luisa De Gaetano
VP - Sr Credit Officer/Manager
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 assigns provisional ratings to Education Loan Asset-Backed Trust I, Series 2013-1
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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