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Rating Action:

Moody's takes rating actions on four National Collegiate Student Loan Trust securitizations

23 Aug 2019

Approximately $292 million of asset-backed securities affected

New York, August 23, 2019 -- Moody's Investors Service ("Moody's") has upgraded the ratings of 4 classes of notes, in 4 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.

Complete rating actions are as follow:

Issuer: National Collegiate Student Loan Trust 2006-3

Cl. A-4, Upgraded to Aaa (sf); previously on Jan 12, 2018 Downgraded to A1 (sf)

Issuer: National Collegiate Student Loan Trust 2006-4

Cl. A-4, Upgraded to B2 (sf); previously on Jan 12, 2018 Downgraded to Caa1 (sf)

Issuer: National Collegiate Student Loan Trust 2007-1

Cl. A-3, Upgraded to Aa2 (sf); previously on Jan 12, 2018 Downgraded to A3 (sf)

Issuer: National Collegiate Student Loan Trust 2007-2

Cl. A-3, Upgraded to Aaa (sf); previously on Jan 12, 2018 Downgraded to A3 (sf)

RATINGS RATIONALE

The primary rationale for the upgrades is the continued build-up in credit enhancement supporting the A-Class notes as a result of the rapid pay down of senior notes in sequential pay structures. Although the ratios of total assets to total liabilities have declined to a range of 58%-65% as of June 2019 from a range of 64%-70% as of August 2018, the senior class A-tranches have benefitted from rapid deleveraging. Subordination and overcollateralization supporting senior A-classes increased to a range of 86%-97% from 72%-81% for the NCSLT 2006-3, 2007-1, 2007-2. After Cl. A-3 in NCSLT 2006-4 was fully repaid, the subordination and overcollateralization supporting Cl. A-4 increased to 5%. Moody's expected lifetime net collateral losses remains largely unchanged at a range of 47.75% to 56.50%. The rating actions also reflect Moody's view that the probability of an occurrence of an event of default (EOD) is low. Therefore, the ratings on the A-class bonds continue to reflect sequential principal payments and the resulting differentiation in credit support amongst the senior tranches.

The NCSLT transactions in today's rating actions continue to be subject to the operational and governance risk concerns brought on by a proposed consent judgment between the Consumer Financial Protection Bureau and the beneficial owners of NCSLT transactions (CFPB Action). In addition to the CFPB lawsuit, the NCSLT transactions are also subject to additional expenses and operational risk from other lawsuits involving the transaction parties. The courts have yet to provide final ruling on these lawsuits.

In today's rating actions, Moody's considered the potential negative impact from extraordinary fees charged to the trusts, the potential deterioration in performance of underlying pools due to servicer transfer, a significant restriction on NCSLT's ongoing ability to enforce debt obligations, implementation of the monetary penalty as outlined in the CFPB proposed consent judgment, and further disgorgement of prior recoveries from current cash flow.

PRINCIPAL METHODOLOGY

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 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 as well as positive outcome for trusts with regard to mentioned lawsuits.

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 as well as negative outcome for trusts with regard to mentioned lawsuits.

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.

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.

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, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

Jane Mordecai
Associate Lead 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

Jinwen Chen
Vice President - Senior Analyst
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.
© 2021 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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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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