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Rating Action:

Moody's reviews for downgrade notes in National Collegiate Student Loan Trust securitizations

18 Oct 2017

Approximately $3.7 billion of asset-backed securities affected

New York, October 18, 2017 -- Moody's Investors Service, ("Moody's") has placed on review for downgrade 27 classes of notes in 15 National Collegiate Student Loan Trusts (NCSLT). The securitizations are backed by private student loans that are not guaranteed by the US Department of Education. The loans are primarily serviced by the Pennsylvania Higher Education Assistance Agency (PHEAA) with U.S. Bank National Association acting as the special servicer. GSS Data Services, Inc is the Administrator for all the securitizations. Moody's has also placed on review for downgrade six classes of certificates in Student Loan ABS Repackaging Trust, Series 2007-1 (SLART 2007-1) and one class of certificate in Student Loan ABS Repackaging Trust, Series 2007-2 (SLART 2007-2. Deutsche Bank Trust Company Americas is the administrator and indenture trustee for both SLART transactions.

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

NCT-2003AR-12, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to Caa3 (sf)

Issuer: National Collegiate Student Loan Trust 2003-1 (The)

Cl. A-7, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Jun 3, 2013 Downgraded to Caa2 (sf)

Cl. IO, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Jun 3, 2013 Downgraded to Caa2 (sf)

Issuer: National Collegiate Student Loan Trust 2004-1

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

Issuer: National Collegiate Student Loan Trust 2004-2

Cl. B, B1 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Confirmed at B1 (sf)

Issuer: National Collegiate Student Loan Trust 2005-1

Cl. A-5-1, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Confirmed at Baa3 (sf)

Cl. A-5-2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Confirmed at Baa3 (sf)

Cl. B, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Upgraded to Caa3 (sf)

Issuer: National Collegiate Student Loan Trust 2005-2

Cl. A-5-1, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Upgraded to Caa1 (sf)

Cl. A-5-2, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Upgraded to Caa1 (sf)

Issuer: National Collegiate Student Loan Trust 2005-3

Cl. A-5-1, B1 (sf) Placed Under Review for Possible Downgrade; previously on Jun 3, 2013 Downgraded to B1 (sf)

Cl. A-5-2, B1 (sf) Placed Under Review for Possible Downgrade; previously on Jun 3, 2013 Downgraded to B1 (sf)

Cl. B, Ca (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Upgraded to Ca (sf)

Issuer: National Collegiate Student Loan Trust 2006-1

Cl. A-5, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to B1 (sf)

Issuer: National Collegiate Student Loan Trust 2006-2

Cl. A-3, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to Aaa (sf)

Cl. A-4, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Jun 3, 2013 Downgraded to Caa3 (sf)

Issuer: National Collegiate Student Loan Trust 2006-3

Cl. A-4, Aaa (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to Aaa (sf)

Cl. A-5, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to Ba1 (sf)

Issuer: National Collegiate Student Loan Trust 2006-4

Cl. A-3, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to Aa1 (sf)

Cl. A-4, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to B1 (sf)

Issuer: National Collegiate Student Loan Trust 2007-1

Cl. A-3, A2 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to A2 (sf)

Cl. A-4, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to Caa1 (sf)

Issuer: Student Loan ABS Repackaging Trust, Series 2007-1

Cl. 3-A-1, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Jun 6, 2013 Downgraded to Caa2 (sf)

Cl. 3-A-IO, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Jun 6, 2013 Downgraded to Caa2 (sf)

Cl. 5-A-1, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Confirmed at Baa3 (sf)

Cl. 5-A-IO, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Confirmed at Baa3 (sf)

Cl. 6-A-1, B1 (sf) Placed Under Review for Possible Downgrade; previously on Jun 6, 2013 Downgraded to B1 (sf)

Cl. 6-A-IO, B1 (sf) Placed Under Review for Possible Downgrade; previously on Jun 6, 2013 Downgraded to B1 (sf)

Issuer: National Collegiate Student Loan Trust 2007-2

Cl. A-3, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to Aa3 (sf)

Cl. A-4, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb 28, 2017 Upgraded to Caa1 (sf)

Issuer: Student Loan ABS Repackaging Trust, Series 2007-2

Cl. IO, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Affirmed Caa1 (sf)

Issuer: National Collegiate Student Loan Trust 2007-3

Cl. A-3-AR-2, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Jun 20, 2014 Downgraded to Caa3 (sf)

Issuer: National Collegiate Student Loan Trust 2007-4

Cl. A-3-AR-2, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Jun 20, 2014 Downgraded to Caa3 (sf)

Issuer: NCF Grantor Trust 2004-2

Cl. A-5-1, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Jan 24, 2017 Confirmed at Baa2 (sf)

RATINGS RATIONALE

The primary rationale for the rating actions is the potential increase in transaction expense and operational risk related to a litigation CFPB has filed against the NCSLT transactions for alleged improper underlying loan documentation and collection practice.

CFPB and the beneficial owners of NCSLT have agreed to a settlement of the claims, as reflected in a proposed consent judgment filed on September 14, 2017, but not yet approved by the Court. Since the proposed consent judgment was filed, however, multiple other interested parties have moved to intervene in the litigation in order to object to terms of settlement forth in the proposed consent judgment. The Court has not yet ruled on the pending motions to intervene or any of the objections to the settlement terms raised by the intervening parties. Accordingly, it is currently unclear to what extent, if at all, the Court will approve the terms of the settlement agreement between CFPB and NCSLT.

Nonetheless, while the ultimate outcome of the litigation is unclear, Moody's notes that the terms of the proposed settlement, if approved, could create significant uncertainty by adversely impacting cash flow, which, in turn, could lead to insufficient credit enhancement to support the affected tranches at their current rating level. Among the proposed settlement terms which could adversely impact cash flow are provisions which: (i) impose monetary penalties, disgorgement and restitution charges in the aggregate sum of at least $19 million; (ii) require NCSLT to discontinue actions to collect on defaulted debt where the claim is time-barred or based on insufficient and/or inaccurate documentation; (iii) prevent NCSLT from enforcing judgments where the underlying claim was time-barred and/or based on insufficient or inaccurate documentation; and (iv) bar or significantly restrict NCSLT's ongoing ability to enforce debt obligations in situations where collection of the debt would be time barred or where NCSLT has insufficient documentation to prove the existence and/or ownership of the loan.

Certain certificates in repackaged transactions were also placed on review as a result of the review for downgrade of the NCSLT notes underlying the repacking trusts. Ratings of the SLART 2007-1, Class 3-A-1, Class 3-A-IO, Class 5-A-1, Class 5-A-IO, Class 6-A-1, and Class 6-A-IO certificates are based on the ratings of the underlying securities in the NCSLT transactions. The rating of the Student Loan ABS Repackaging Trust 2007-2, Class IO certificate is based on the ratings of the underlying IO certificates in the SLART 2007-1 transaction.

During the review period, Moody's will further evaluate impact of the CFPB lawsuit to the NCSLT transactions and monitor ongoing legal developments.

The principal methodology used in rating NCSLT Trusts was "Moody's Approach to Rating U.S. Private Student Loan-Backed Securities" published in January 2010. The principal methodology used in rating SLART 2007-1 and SLART 2007-2 was "Moody's Approach to Rating Repackaged Securities" published in June 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Additionally, the methodology used in rating NCSLT 2003-1, NCSLT 2004-1, and SLART 2007-1 was "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in June 2017. 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

Among the factors that could drive the ratings up are lower defaults and net losses on the underlying student loan pools than Moody's expects.

Down

Among the factors that could drive the ratings down are higher defaults and net losses on the underlying student loan pools 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 for NCSLT Trusts 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.

In rating SLART 2007-1 and SLART 2007-2 Moody's did not use any models, or loss or cash flow analysis, in its analysis.

Moody's did not use any stress scenario simulations in its analysis.

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
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

Michael Labuskes
VP - Senior Credit Officer
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

No Related Data.
© 2019 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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