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