Approximately $9.2 billion of asset-backed securities affected.
New York, June 09, 2011 -- Moody's Investors Service downgraded 43 classes of notes from 12 SLM Private
Credit Student Loan trusts sponsored, serviced and administered
by Sallie Mae, Inc., a wholly-owned subsidiary
of SLM Corporation. The affected notes include 24 tranches of senior
notes and 19 tranches of subordinate notes. The underlying collateral
backing these notes consists of private credit student loans that are
not guaranteed or reinsured under the Federal Family Education Loan Program
(FFELP) or any other federal student loan program.
RATINGS RATIONALE
The downgrades were prompted by deterioration in collateral performance
and the resulting erosion of parity levels (i.e. the ratio
of total assets to total liabilities) for all transactions. The
performance deterioration contributed to Moody's increase of expected
net losses to a range of 13%-20% from a range of
9%-15% as of the last rating action in August 2009,
stated as a percentage of the original pool balance plus any prefunded
amounts.
As of the latest reporting date, the trusts have incurred cumulative
net losses ranging from 9% to 13% of the original pool balance.
In addition, delinquent loan balances remained elevated in all transactions
with 90-day delinquencies accounting for 3%-5%
of loans in active repayment. The delinquency pipeline is expected
to contribute to additional defaults in the future.
High defaults have been eroding the collateral base, causing steady
declines in parity levels for most securitizations. Over the last
nine months, parity has dropped by as much as 1.5 %
for the affected transactions and for some transactions it decreased to
a level that is below 100%. The reduction in the parity
levels has eroded the trusts' excess spread, which is needed
to absorb losses and build up parity. The loss of excess spread
is expected to contribute to further declines in the parity levels.
In addition to the parity declines, the 2003 securitizations were
significantly negatively affected by the higher costs of funding associated
with auction rate notes. Since the collapse of the auction rate
market in the beginning 2008, the coupon rates on these notes have
been reset to a "failed-auction" rate, which
increases (among other things) if the ratings of the notes fall below
Aaa, and increases further if the ratings fall below A3.
Because we are downgrading these notes below the trigger levels,
their coupon rates increase to either LIBOR plus 2.5% or
LIBOR plus 3.5%. These coupon rates further erode
excess spread and expose the subordinated classes of notes to a significant
default risk.
Available credit enhancement includes overcollateralization, reserve
funds, subordination, and excess spread. Significant
structural features include note parity triggers, reserve fund floors,
and the change in cash flow allocations among the senior classes under
the occurrence of certain events. Senior notes in the trusts benefit
from note parity triggers, which can redirect interest payments
on the subordinate notes to principal payments on the senior notes.
The principal methodology used in these rating actions was "Moody's Approach
to Rating U.S. Private Student Loan-Backed Securities",
published on January 6th, 2010 and is available at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issue can also be found in the
Rating Methodologies sub-directory on Moody's website.
To assess rating implications of the higher expected losses, each
individual transaction was run through a variety of stress scenarios using
the Structured Finance Workstation® (SFW), a cash flow model
developed by Moody's Wall Street Analytics.
Our expected lifetime net losses as a percentage of original pool balance
plus any loans added subsequently are approximately 12.6%,
13.8%, 14.5%, 15.8%,
17.1%, 15.4%, 19.1%,
16.4%, 17.2%, 18.4%,
20.0%, and 19.2% for the 2002-A,
2003-A, 2003-B, 2003-C, 2004-A,
2004-B, 2005-A, 2005-B, 2006-A,
2006-B, 2006-C and 2007-A trusts, respectively.
Primary sources of uncertainty with regard to expected losses are the
weak economic environment and the high unemployment rate, which
adversely impacts the income-generating ability of the borrowers.
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.
RATINGS:
Complete actions are as follows:
Issuer: SLM Private Credit Student Loan Trust 2002-A
Class C, Downgraded to Baa1 (sf); previously on May 26,
2011 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2003-A
Class A-2, Confirmed at Aaa (sf); previously on May
26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Class A-3, Downgraded to A1 (sf); previously on May
26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Class A-4, Downgraded to A1 (sf); previously on May
26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Class B, Downgraded to Baa1 (sf); previously on May 26,
2011 Aa3 (sf) Placed Under Review for Possible Downgrade
Class C, Downgraded to Ba3 (sf); previously on May 26,
2011 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2003-B
Class A-2, Downgraded to Aa2 (sf); previously on May
26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Class A-3, Downgraded to A3 (sf); previously on May
26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Class A-4, Downgraded to A3 (sf); previously on May
26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Class B, Downgraded to Baa3 (sf); previously on May 26,
2011 Aa3 (sf) Placed Under Review for Possible Downgrade
Class C, Downgraded to Caa1 (sf); previously on May 26,
2011 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2003-C
Cl. A-2, Downgraded to Aa2 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-3, Downgraded to Baa1 (sf); previously
on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-4, Downgraded to Baa1 (sf); previously
on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-5, Downgraded to Baa1 (sf); previously
on Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Baa3 (sf); previously on Sep 1,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Caa3 (sf); previously on Sep 1,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2004-A
Cl. A-3, Downgraded to Aa1 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A1 (sf); previously on Sep 1,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa3 (sf); previously on Sep 1,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2004-B
Cl. A-4, Confirmed at Aaa (sf); previously on
Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Confirmed at Aa3 (sf); previously on Sep 1,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa1 (sf); previously on Sep 1,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2005-A
Cl. A-3, Downgraded to Aa1 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-4, Downgraded to Aa2 (sf); previously on
Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A1 (sf); previously on Sep 1,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa1 (sf); previously on Sep 1,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2005-B
Cl. A-2, Downgraded to Aa1 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-3, Downgraded to Aa1 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-4, Downgraded to Aa3 (sf); previously on
Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Sep 1,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa2 (sf); previously on Sep 1,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2006-A
Cl. A-4, Downgraded to Aa1 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-5, Downgraded to Aa3 (sf); previously on
Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Sep 1,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Confirmed at A3 (sf); previously on Sep 1,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2006-B
Cl. A-4, Downgraded to Aa2 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-5, Downgraded to Aa3 (sf); previously on
Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Sep 1,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa1 (sf); previously on Sep 1,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2006-C
Cl. A-4, Downgraded to Aa2 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-5, Downgraded to A1 (sf); previously on
Sep 1, 2010 Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Sep 1,
2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. C, Confirmed at Baa1 (sf); previously on Sep 1,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2007-A
Cl. A-2, Downgraded to A1 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-3, Downgraded to A1 (sf); previously on
May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-4, Downgraded to A1 (sf); previously on
Sep 1, 2010 Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Sep 1,
2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. C-1, Confirmed at Baa1 (sf); previously on
Sep 1, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. C-2, Confirmed at Baa1 (sf); previously on
Sep 1, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, confidential and proprietary Moody's
Investors Service information and confidential and proprietary Moody's
Analytics' information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
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.
New York
Jerry Lu
Senior Associate
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Irina Faynzilberg
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades 43 tranches in 12 SLM student loan deals