Approximately $740 million of asset-backed securities affected
New York, January 30, 2009 -- Moody's Investors Service has completed its review of the underlying
ratings of 18 bonds issued by two Missouri Higher Education Loan Authority
trusts. Bonds are guaranteed by Ambac Assurance Corporation or
MBIA Insurance Corporation whose insurance financial strength ratings
are Baa1 with a developing outlook.
According to Moody's policy, securities insured by financial guarantors
are rated at the higher of the guarantor's insurance financial strength
rating and the underlying rating, which reflects the intrinsic credit
quality of the bonds in the absence of the guarantee.
The performance of the 1995 trust is within Moody's expectation.
The ratings on the bonds were downgraded due to the recent downgrade of
Ambac. The A2 ratings reflect Moody's analysis of the student
loan collateral as well as credit and structural protections available
in the transaction. Moody's compared the total credit enhancement
with the projected cumulative net losses on the collateral, which
consists of 73% private student loans as of September 30,
2008. The credit enhancement includes overcollateralization,
reserve fund, capitalized interest and other cash accounts and excess
spread. As of the date, the sum of overcollateralization,
reserve fund and other cash accounts exceeded the sum of outstanding bonds
and accrued interest on the bonds by approximately 3.08%
(i.e. total parity, or the ratio of total assets to
total liabilities of 103.08%). In addition,
96% of the bonds outstanding were auction rate securities.
At the failed auction rate, the trust is expected to generate approximately
1% to 2% of excess spread per annum, which is also
available to cover losses on the loans. The ratio of available
credit enhancement to the projected remaining net losses on the private
loans is consistent with similar private student loan transactions in
the same rating category.
The Baa1 ratings of the bonds issued by the 2005 indenture were based
on the financial guaranty insurance policy issued by MBIA Insurance Corporation,
which unconditionally and irrevocably guarantees timely payment of interest
and the ultimate payment of principal on the maturity date of the bonds.
The 2005 trust is funded entirely by Variable Rate Funding Notes (VRDN).
As of September 30, 2008, the trust was undercollateralized
by 2.15% (i.e. total parity, or the
ratio of total assets to total liabilities was 97.85%).
In addition, all bonds were put back to the liquidity bank.
At the bank rate, the trust is expected to generate significant
negative excess spread.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found at www.moodys.com
in the Credit Policy & Methodologies directory.
The complete rating actions are as follows
Issuer: Missouri Higher Education Loan Authority (1995 Indenture)
Series 95-A(Due 2/15/25), Downgraded to A2; previously
on 11/17/2008 Aa3 Placed Under Review Direction Uncertain;
Financial Guarantor: Ambac Assurance Corporation (Baa1)
Series 95-B(Due 2/15/25), Downgraded to A2; previously
on 11/17/2008 Aa3 Placed Under Review Direction Uncertain;
Financial Guarantor: Ambac Assurance Corporation (Baa1)
Series 95-C(Due 2/15/25), Downgraded to A2; previously
on 11/17/2008 Aa3 Placed Under Review Direction Uncertain;
Financial Guarantor: Ambac Assurance Corporation (Baa1)
Series 95-D(Due 2/15/25), Downgraded to A2; previously
on 11/17/2008 Aa3 Placed Under Review Direction Uncertain;
Financial Guarantor: Ambac Assurance Corporation (Baa1)
Series 96-G, Downgraded to A2; previously on 11/17/2008
Aa3 Placed Under Review Direction Uncertain;
Financial Guarantor: Ambac Assurance Corporation (Baa1)
Series 96-H, Downgraded to A2; previously on 11/17/2008
Aa3 Placed Under Review Direction Uncertain;
Financial Guarantor: Ambac Assurance Corporation (Baa1)
Series 2006-I, Downgraded to A2; previously on 11/17/2008
Aa3 Placed Under Review Direction Uncertain;
Financial Guarantor: Ambac Assurance Corporation (Baa1)
Series 2006-J, Downgraded to A2; previously on 11/17/2008
Aa3 Placed Under Review Direction Uncertain;
Financial Guarantor: Ambac Assurance Corporation (Baa1)
Issuer: Missouri Higher Education Loan Authority (2005 Indenture)
Series 2005A, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2005B, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2005C, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2005D, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2005E, Downgraded to Baa2; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2006A, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2006B, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2006C, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2006D, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
Series 2006E, Downgraded to Baa1; previously on 9/18/2008 A2
Placed Under Review for Possible Downgrade;
Financial Guarantor: MBIA Insurance Corporation (Baa1)
For more information please see www. Moodys.com
New York
Irina Faynzilberg
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
JingJing Dang
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades ratings of 18 classes of Missouri Higher Education Loan Authority student loan revenue bonds