Approximately $4.7 billion of asset-backed securities affected
New York, May 26, 2011 -- Moody's Investors Service has placed under review for possible downgrade
23 classes of notes from eleven SLM Private Credit Student Loan trusts
sponsored, serviced and administered by Sallie Mae, Inc.,
a wholly-owned subsidiary of SLM Corporation. The notes
that were placed under review include eighteen tranches of senior Class
A notes and five tranches of subordinate notes. The underlying
collateral consists of private credit student loans that are not guaranteed
or reinsured under the Federal Family Education Loan Program (FFELP) or
any other federal student loan program.
RATINGS RATIONALE
The review of the notes was prompted by worse than expected performance
of the underlying collateral as indicated by elevated defaults and delinquencies
and declines in total parity, i.e. the ratio of total
assets to total liabilities, of the affected transactions.
The performance evaluation of the deals was based on the adequacy of the
available credit enhancement for each class of notes relative to Moody's
expected loss on the remaining pool and assumed loss volatility.
Credit enhancement on these transactions includes overcollateralization,
reserve funds, subordination and excess spread.
Delinquencies and defaults spiked in the third quarter of 2009 as a result
of a tighter forbearance policy implemented by Sallie Mae in late 2008.
However, the effects of this policy change should have subsided
by now. Instead, delinquencies remain at elevated levels,
rolling through to higher than expected defaults, which continue
to erode the parity levels for most securitizations. Although more
seasoned deals issued in 2002 and 2003 should have benefited from significant
seasoning and experienced a slowdown in defaults, the 30 plus days
delinquency levels for these deals show little signs of improvement and
remain elevated at 7-9% of active repayment. In addition,
the cumulative defaults to date for these trusts are higher than expected,
ranging between 10.0% and 12.3%. Total
parity of 2003-A, 2003-B and 2003-C transactions
declined from a range of 102.23-101.01% in
May 2010 to 100.70.-99.55% in February
2011 and total parity for the post 2003-C transactions declined
from a range of 102.51-100.80% to 102.45-99.85%
over the same period.
During the review period, Moody's will refine the lifetime defaults
for the transactions and perform cash flow analysis in order to determine
the appropriate ratings.
Primary sources of uncertainty with regard to expected losses are the
weak economic environment and the high unemployment rate, which
adversely impacts the income-generating ability of the borrowers.
Lower income levels will effectively force increasing amounts of borrowers
into delinquency and default across all loan types.
The principal methodology used in these rating actions was "Moody's Approach
to Rating U.S. Private Student Loan-Backed Securities"
rating methodology, published on January 6th, 2010.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found on Moody's website.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
in this transaction.
RATINGS
Issuer: SLM Private Credit Student Loan Trust 2002-A
Class C, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 2, 2007 Upgraded to A3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-A
Class A-2, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Mar 19, 2003 Assigned Aaa (sf)
Class A-3, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Mar 19, 2003 Assigned Aaa (sf)
Class A-4, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Mar 19, 2003 Assigned Aaa (sf)
Class B, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 2, 2007 Upgraded to Aa3 (sf)
Class C, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 2, 2007 Upgraded to A3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-B
Class A-2, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Jun 26, 2003 Assigned Aaa (sf)
Class A-3, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Jun 26, 2003 Assigned Aaa (sf)
Class A-4, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Jun 26, 2003 Assigned Aaa (sf)
Class B, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 2, 2007 Upgraded to Aa3 (sf)
Class C, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 2, 2007 Upgraded to A3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-C
Cl. A-2, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Oct 10, 2003 Assigned Aaa (sf)
Cl. A-3, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Aug 13, 2009 Confirmed at Aaa (sf)
Cl. A-4, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Aug 13, 2009 Confirmed at Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2004-A
Cl. A-3, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Aug 13, 2009 Confirmed at Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2005-A
Cl. A-3, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Apr 29, 2005 Definitive Rating Assigned
Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2005-B
Cl. A-2, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Oct 28, 2005 Definitive Rating Assigned
Aaa (sf)
Cl. A-3, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Aug 13, 2009 Confirmed at Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-A
Cl. A-4, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Apr 7, 2006 Definitive Rating Assigned
Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-B
Cl. A-4, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jun 8, 2006 Definitive Rating Assigned
Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-C
Cl. A-4, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Sep 28, 2006 Definitive Rating Assigned
Aaa (sf)
Issuer: SLM Private Credit Student Loan Trust 2007-A
Cl. A-2, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Mar 29, 2007 Definitive Rating Assigned
Aaa (sf)
Cl. A-3, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Mar 29, 2007 Definitive Rating Assigned
Aaa (sf)
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's Investors Service adopts all necessary measures so that the information
it uses in assigning a credit rating is of sufficient quality and from
reliable sources; however, Moody's Investors Service does not
and cannot in every instance independently verify, audit or validate
information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
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
Jerry Lu
Senior Associate
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's reviews for possible downgrade 23 notes from eleven Sallie Mae private student loan trusts