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Rating Action:

Moody's places on review for upgrade 12 classes of notes in 9 National Collegiate Student Loan Trust securitizations

01 Dec 2016

New York, December 01, 2016 -- Moody's Investors Service, ("Moody's") has placed under review for upgrade the ratings of 12 classes of notes in 9 National Collegiate Student Loan Trust (NCSLT) securitizations backed by private (i.e. not government-guaranteed) student loans. The loans are serviced primarily by the Pennsylvania Higher Education Assistance Agency (PHEAA) with U.S. Bank, N.A. acting as the special servicer. The administrator for all securitizations is GSS Data Services, Inc., a wholly owned subsidiary of Goal Structured Solutions, Inc.

Complete rating actions are as follows:

Issuer: The National Collegiate Master Student Loan Trust I (2001 Indenture)

NCT-2003AR-11, B1 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2014 Confirmed at B1 (sf)

Issuer: National Collegiate Student Loan Trust 2006-1

Cl. A-4, A2 (sf) Placed Under Review for Possible Upgrade; previously on Dec 18, 2015 Upgraded to A2 (sf)

Issuer: National Collegiate Student Loan Trust 2006-2

Cl. A-3, Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2014 Upgraded to Baa2 (sf)

Issuer: National Collegiate Student Loan Trust 2006-3

Cl. A-3, Aa1 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2014 Upgraded to Aa1 (sf)

Cl. A-4, Baa1 (sf) Placed Under Review for Possible Upgrade; previously on Dec 18, 2015 Upgraded to Baa1 (sf)

Issuer: National Collegiate Student Loan Trust 2006-4

Cl. A-2, Aa1 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2014 Upgraded to Aa1 (sf)

Cl. A-3, Baa1 (sf) Placed Under Review for Possible Upgrade; previously on Dec 18, 2015 Upgraded to Baa1 (sf)

Issuer: National Collegiate Student Loan Trust 2007-1

Cl. A-3, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 18, 2015 Upgraded to Baa3 (sf)

Issuer: National Collegiate Student Loan Trust 2007-2

Cl. A-2, A2 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2014 Confirmed at A2 (sf)

Cl. A-3, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2014 Confirmed at Baa3 (sf)

Issuer: National Collegiate Student Loan Trust 2007-3

Cl. A-3-AR-1, B1 (sf) Placed Under Review for Possible Upgrade; previously on Jun 3, 2013 Downgraded to B1 (sf)

Issuer: National Collegiate Student Loan Trust 2007-4

Cl. A-3-AR-1, B1 (sf) Placed Under Review for Possible Upgrade; previously on Jun 3, 2013 Downgraded to B1 (sf)

RATINGS RATIONALE

The primary rationale for the rating actions is the continued build-up in credit enhancement supporting the affected classes as a result of the substantial pay down of the top senior bonds as a result of the sequential pay structure of these transactions. Although the ratios of total assets to total liabilities have declined to a range of 57%-75% as of October 2016 from a range of 62%-77% as of August 2015, the top-pay senior classes have benefitted from rapid deleveraging. Subordination and overcollateralization supporting the 12 classes of notes on review for upgrade increased to a range of 53%-100% as of October 2016 from a range of 39%-85% as of August 2015. The rating actions also reflect our view that the probability of an occurrence of an event of default (EOD) is currently low. Therefore, the ratings on senior bonds continue to reflect sequential principal payments and the resulting differentiation in credit support amongst the senior tranches.

The transactions in today's rating actions are not subject to the operational risk concerns outlined in our March 2016 rating action. In that rating action, Moody's placed on review for downgrade 8 classes of notes in 4 different NCSLT transactions due to the increase in operational risk brought on by a disputed servicing agreement with Odyssey Education Resources, LLC. (See, Moody's reviews for downgrade 8 classes of notes in 4 National Collegiate Student Loan Trust securitizations). Since the transactions in today's rating actions are not subject to a similar disputed servicing arrangement with Odyssey, the operational risk concerns arising from that disputed arrangement do not affect these deals. These transactions, however, are subject to a Notice of Servicer Default claiming that PHEAA failed to comply with the terms of its servicing agreement applicable to all 15 NCSLT transactions (which includes the 9 transactions affected by today's rating actions) and to a lawsuit brought by the 15 trusts against PHEAA. Although this litigation could increase extraordinary expenses charged to the trusts, we believe that, with respect to the senior bonds in today's rating actions, this risk is mitigated by the build-up in credit enhancement resulting from the structural features of the transactions.

The principal methodology used in these ratings was "Moody's Approach to Rating U.S. Private Student Loan-Backed Securities" published in Janauary 2010. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.

Factors that would lead to an upgrade or downgrade of the ratings:

Up

Among the factors that could drive the ratings up are a decrease in basis risk and lower net losses on the underlying assets than Moody's expects.

Down

Among the factors that could drive the ratings down are an increase in basis risk and higher net losses on the underlying assets than Moody's expects.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

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 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 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.

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.

Donald Lee
Associate 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

Michael Labuskes
VP - Senior Credit Officer
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

No Related Data.
© 2020 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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