Approximately $2.6 billion of asset-backed securities affected
New York, October 01, 2020 -- Moody's Investors Service, ("Moody's") has
downgraded six securities and confirmed two securities issued by eight
FFELP student loan securitizations. The securitizations are backed
by student loans originated under the Federal Family Education Loan Program
(FFELP) that are guaranteed by the US government for a minimum of 97%
of defaulted principal and accrued interest.
The complete rating actions are as follows:
Issuer: Academic Loan Funding Trust 2012-1
2012-1 Class A-2, Downgraded to Aa1 (sf); previously
on Jun 3, 2020 Aaa (sf) Placed Under Review for Possible Downgrade
Issuer: Access Group, Inc. Series 2007-1
2007-A-4, Confirmed at Ba2; previously on Jun
3, 2020 Ba2 Placed Under Review for Possible Downgrade
Issuer: Navient Student Loan Trust 2014-1
Floating Rate Class A-3 Notes, Downgraded to A3 (sf);
previously on Jun 3, 2020 Downgraded to A2 (sf) and Placed Under
Review for Possible Downgrade
Issuer: Navient Student Loan Trust 2015-1
Floating Rate Class A-2 Notes, Downgraded to Aa1 (sf);
previously on Feb 26, 2015 Definitive Rating Assigned Aaa (sf)
Issuer: Nelnet Student Loan Trust 2007-1
Cl. A-4, Downgraded to A3 (sf); previously on
Jun 3, 2020 A1 (sf) Placed Under Review for Possible Downgrade
Issuer: SLC Student Loan Trust 2007-2
Cl. A-3, Confirmed at A1 (sf); previously on
Jun 3, 2020 Downgraded to A1 (sf) and Placed Under Review for Possible
Downgrade
Issuer: SLM Student Loan Trust 2005-4
Cl. A-4, Downgraded to Aa1 (sf); previously on
May 5, 2014 Affirmed Aaa (sf)
Issuer: SLM Student Loan Trust 2010-2
Class A Notes, Downgraded to A2 (sf); previously on Jun 3,
2020 Downgraded to A1 (sf) and Placed Under Review for Possible Downgrade
RATINGS RATIONALE
The rating actions reflect our revised expectations on the performance
of the underlying FFELP loans driven by increased forbearance as a result
of a slowdown in economic activity and an increase in unemployment due
to the coronavirus outbreak.
In our analysis, we considered the elevated transaction-specific
forbearance levels declining over a period up to 24 months. Due
to significant increases in forbearance, certain transactions are
subject to slower collateral pool amortization and subsequently bond payoff
risk by their legal final maturity dates. The peak forbearance
level in these pools ranged between 18% and 34% in the second
quarter of 2020, and the forbearance level of some pools has subsequently
reduced to between 11% and 21% during the third quarter.
Today's actions reflect the updated performance of the transactions and
updated expected loss on the tranches across Moody's cash flow scenarios.
Moody's quantitative analysis derives the expected loss for a tranche
using 28 cash flow scenarios with weights accorded to each scenario.
The rating actions also reflect the granularity of the collateral data
Moody's receives. Generally, more granularity allows for
a better understanding of the collateral characteristics important in
evaluating performance and the likelihood of repayment by the bonds' final
maturity dates. Given the low likelihood of our modeled assumptions
persisting for an extended period of time, certain Navient notes
with final maturity dates of more than five years are rated higher than
indicated by the model output. The downgrade actions of Class A-4
notes of SLM Student Loan Trust 2005-4 and Class A-2 notes
of Navient Student Loan Trust 2015-1 reflect considerations of
the collateral data granularity in relation to the remaining time to the
bonds' respective maturities.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of consumer assets from the
current weak U.S. economic activity and a gradual recovery
for the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating Securities Backed by FFELP Student Loans" published in May 2020
and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226065.
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 if the paydown speed of the loan pool
increases as a result of declining borrower usage of deferment,
forbearance and IBR, increasing voluntary prepayment rates,
or prepayments with proceeds from sponsor repurchases of student loan
collateral. Moody's could also upgrade the ratings owing to a build-up
in credit enhancement.
Down
Moody's could downgrade the ratings if the paydown speed of the loan pool
declines as a result of lower than expected voluntary prepayments,
and higher than expected deferment, forbearance and IBR rates,
which would threaten full repayment of the class by its final maturity
date. In addition, because the US Department of Education
guarantees at least 97% of principal and accrued interest on defaulted
loans, Moody's could downgrade the rating of the notes if it were
to downgrade the rating on the United States government.
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.
The following disclosure applies only to credit ratings carrying the (sf)
indicator:
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 https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
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 below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Jiaoren Wang
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
Vice President - Senior Analyst
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
