New York, February 25, 2014 -- Moody's upgraded 34 classes, downgraded 2 classes and affirmed
22 classes of notes from 12 private student loan securitizations sponsored,
administered and serviced by Sallie Mae, Inc., a wholly-owned
subsidiary of SLM Corporation (SLM). The underlying collateral
consists of private credit student loans that are not guaranteed or reinsured
under either the Federal Family Education Loan Program (FFELP) or any
other federal student loan program.
RATINGS RATIONALE
The primary rationale for the upgrades is the improved performance of
the underlying collateral pools with the ratios of total assets to total
liabilities (total parity levels) increasing for most of the transactions
by 1%-2% over the 12-month period ending in
December 2013. Reduced defaults on the remaining collateral pools
resulting from pool seasoning contributed to the increased total parity
levels. In addition, the top-pay senior classes are
benefiting from rapid deleveraging.
The downgrades are a result of the deterioration in the total parity levels.
The 2003-A, 2003-B and 2003-C transactions
suffer from high funding costs, because they are partially funded
with auction rate securities. The high funding cost of auction-rate
securities that are currently in the failed auction mode erode excess
spread and expose the subordinated classes of notes in these transactions
to a significant default risk. The annualized excess spreads for
these transactions is approximately 0.6%-0.7%,
which is significantly lower than the 2.0%-3.6%
for others transactions.
Moody's placed Class C in the 2005-B transaction under review
for upgrade due to the improved credit enhancement level of the transaction.
However, since Moody's recently placed the rating of the swap
counterparty, Royal Bank of Scotland (RBS), under review for
downgrade, it will review the rating of the class pending the final
resolution of the rating of the swap counterparty. For further
information about the RBS rating review, please see "Moody's
reviews Royal Bank of Scotland's ratings for downgrade" on www.moodys.com
for a copy of this press release.
Today's rating actions also reflect corrections to the cash flow
models used in rating these transactions in June 2011. The models
had incorrectly calculated the principal distribution amount to various
classes of notes and paid interest on subordinate notes when the cash
should have been distributed to senior notes as principal payment.
As a result of the discovery of these errors, certain ratings were
place on review on October 15, 2013. The errors have now
been corrected, and today's rating actions reflect these changes.
The corrections generally have a positive impact on the ratings of the
senior notes and a negative impact on the ratings of the subordinate notes.
Our updated lifetime net losses as a percentage of original pool balance
are approximately 12.2%, 13.4%,
14.5%, 15.8%, 17.5%,
15.8%, 20.0%, 16.8%,
17.6%, 19.6%, 21.6%
and 20.8% for the 2002-A, 2003-A,
2003-B, 2003-C, 2004-A, 2004-B,
2005-A, 2005-B, 2006-A, 2006-B,
2006-C and 2007-A trusts, respectively.
The principal methodology used in these ratings was "Moody's Approach
to Rating U.S. Private Student Loan-Backed Securities"
published in January 2010. Please see the Credit Policy page on
www.moodys.com for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the rating
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.
Primary sources of uncertainty with regard to expected loss are the weak
economic environment and the high unemployment rate, which adversely
impacts the income-generating ability of the borrowers.
To assess rating implications of the higher expected losses, each
individual transaction was run through a variety of stress scenarios using
the Structured Finance Workstation® (SFW), a cash flow model
developed by Moody's Wall Street Analytics.
The complete rating actions as follow:
Issuer: SLM Private Credit Student Loan Trust 2002-A
Class A-2, Affirmed Aaa (sf); previously on Oct 15,
2013 Confirmed at Aaa (sf)
Class B, Upgraded to Aa1 (sf); previously on Oct 15,
2013 Confirmed at Aa3 (sf)
Class C, Upgraded to Aa3 (sf); previously on Jun 9, 2011
Downgraded to Baa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-A
Class A-2, Affirmed Aaa (sf); previously on Oct 15,
2013 Confirmed at Aaa (sf)
Class A-3, Upgraded to Aa3 (sf); previously on Jun 9,
2011 Downgraded to A1 (sf)
Class A-4, Upgraded to Aa3 (sf); previously on Jun 9,
2011 Downgraded to A1 (sf)
Class B, Upgraded to A1 (sf); previously on Jun 9, 2011
Downgraded to Baa1 (sf)
Class C, Downgraded to Caa3 (sf); previously on Oct 15,
2013 Ba3 (sf) Placed Under Review for Possible Downgrade
Issuer: SLM Private Credit Student Loan Trust 2003-B
Class A-2, Upgraded to Aaa (sf); previously on Oct 15,
2013 Aa2 (sf) Placed Under Review for Possible Upgrade
Class A-3, Upgraded to Aa3 (sf); previously on Oct 15,
2013 A3 (sf) Placed Under Review for Possible Upgrade
Class A-4, Upgraded to Aa3 (sf); previously on Oct 15,
2013 A3 (sf) Placed Under Review for Possible Upgrade
Class B, Upgraded to A1 (sf); previously on Oct 15, 2013
Baa3 (sf) Placed Under Review for Possible Upgrade
Class C, Downgraded to Caa3 (sf); previously on Jun 9,
2011 Downgraded to Caa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2003-C
Cl. A-2, Upgraded to Aaa (sf); previously on
Oct 15, 2013 Aa2 (sf) Placed Under Review for Possible Upgrade
Cl. A-3, Upgraded to Aa3 (sf); previously on
Oct 15, 2013 Baa1 (sf) Placed Under Review for Possible Upgrade
Cl. A-4, Upgraded to Aa3 (sf); previously on
Oct 15, 2013 Baa1 (sf) Placed Under Review for Possible Upgrade
Cl. A-5, Upgraded to Aa3 (sf); previously on
Oct 15, 2013 Baa1 (sf) Placed Under Review for Possible Upgrade
Cl. B, Upgraded to A3 (sf); previously on Oct 15,
2013 Baa3 (sf) Placed Under Review for Possible Upgrade
Cl. C, Affirmed Caa3 (sf); previously on Jun 9,
2011 Downgraded to Caa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2004-A
Cl. A-2, Affirmed Aaa (sf); previously on Oct
15, 2013 Confirmed at Aaa (sf)
Cl. A-3, Affirmed Aa1 (sf); previously on Oct
15, 2013 Confirmed at Aa1 (sf)
Cl. B, Upgraded to Aa3 (sf); previously on Jun 9,
2011 Downgraded to A1 (sf)
Cl. C, Upgraded to Baa2 (sf); previously on Jun 9,
2011 Downgraded to Baa3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2004-B
Cl. A-2, Affirmed Aaa (sf); previously on Oct
15, 2013 Confirmed at Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Oct
15, 2013 Confirmed at Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Oct
15, 2013 Confirmed at Aaa (sf)
Cl. B, Upgraded to Aa2 (sf); previously on Oct 15,
2013 Confirmed at Aa3 (sf)
Cl. C, Upgraded to A1 (sf); previously on Jun 9,
2011 Downgraded to Baa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2005-A
Cl. A-2, Affirmed Aaa (sf); previously on Oct
15, 2013 Confirmed at Aaa (sf)
Cl. A-3, Upgraded to Aaa (sf); previously on
Oct 15, 2013 Confirmed at Aa1 (sf)
Cl. A-4, Upgraded to Aa1 (sf); previously on
Oct 15, 2013 Confirmed at Aa2 (sf)
Cl. B, Upgraded to Aa3 (sf); previously on Nov 28,
2012 Confirmed at A1 (sf)
Cl. C, Affirmed Baa1 (sf); previously on Nov 28,
2012 Confirmed at Baa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2005-B
Cl. A-2, Upgraded to Aaa (sf); previously on
Oct 15, 2013 Confirmed at Aa1 (sf)
Cl. A-3, Upgraded to Aaa (sf); previously on
Oct 15, 2013 Confirmed at Aa1 (sf)
Cl. A-4, Upgraded to Aa1 (sf); previously on
Oct 15, 2013 Confirmed at Aa3 (sf)
Cl. B, Upgraded to Aa3 (sf); previously on Oct 15,
2013 A2 (sf) Placed Under Review for Possible Upgrade
Cl. C, Baa2 (sf) Placed Under Review for Possible Upgrade;
previously on Jun 9, 2011 Downgraded to Baa2 (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-A
Cl. A-3, Affirmed Aaa (sf); previously on Oct
15, 2013 Confirmed at Aaa (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on
Oct 15, 2013 Confirmed at Aa1 (sf)
Cl. A-5, Upgraded to Aa1 (sf); previously on
Oct 15, 2013 Aa3 (sf) Placed Under Review for Possible Upgrade
Cl. B, Upgraded to A1 (sf); previously on Jun 9,
2011 Downgraded to A2 (sf)
Cl. C, Affirmed A3 (sf); previously on Jun 9,
2011 Confirmed at A3 (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-B
Cl. A-3, Affirmed Aaa (sf); previously on Oct
15, 2013 Confirmed at Aaa (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on
Oct 15, 2013 Confirmed at Aa2 (sf)
Cl. A-5, Upgraded to Aa1 (sf); previously on
Oct 15, 2013 Confirmed at Aa3 (sf)
Cl. B, Upgraded to A1 (sf); previously on Oct 15,
2013 A2 (sf) Placed Under Review for Possible Upgrade
Cl. C, Affirmed Baa1 (sf); previously on Jun 9,
2011 Downgraded to Baa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2006-C
Cl. A-3, Affirmed Aaa (sf); previously on Oct
15, 2013 Confirmed at Aaa (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on
Oct 15, 2013 Confirmed at Aa2 (sf)
Cl. A-5, Upgraded to Aa1 (sf); previously on
Oct 15, 2013 A1 (sf) Placed Under Review for Possible Upgrade
Cl. B, Affirmed A2 (sf); previously on Jun 9,
2011 Downgraded to A2 (sf)
Cl. C, Affirmed Baa1 (sf); previously on Jun 9,
2011 Confirmed at Baa1 (sf)
Issuer: SLM Private Credit Student Loan Trust 2007-A
Cl. A-2, Upgraded to Aa2 (sf); previously on
Jun 9, 2011 Downgraded to A1 (sf)
Cl. A-3, Affirmed A1 (sf); previously on Jun
9, 2011 Downgraded to A1 (sf)
Cl. A-4, Affirmed A1 (sf); previously on Jun
9, 2011 Downgraded to A1 (sf)
Cl. B, Affirmed A2 (sf); previously on Jun 9,
2011 Downgraded to A2 (sf)
Cl. C-1, Affirmed Baa1 (sf); previously on Jun
9, 2011 Confirmed at Baa1 (sf)
Cl. C-2, Affirmed Baa1 (sf); previously on Jun
9, 2011 Confirmed at Baa1 (sf)
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.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of these transactions
in the past six months.
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.
As the section on loss and cash flow analysis describes, 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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
Jinwen Chen
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
Debashish Chatterjee
Associate Managing Director
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
Moody's takes rating actions on SLM private credit student loan securitizations
