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Rating Action:

Moody's takes rating actions on six Navient FFELP securitizations

13 Aug 2018

Approximately $970 million of asset-backed securities affected.

New York, August 13, 2018 -- Moody's Investors Service ("Moody's") has upgraded the rating of one class of notes and downgraded the ratings of eight classes of notes issued from six student loan securitizations sponsored, serviced, and administered by Navient Solutions, Inc. The underlying collateral consists of loans originated under the Federal Family Education Loan Program (FFELP), which are guaranteed by the US government for a minimum of 97% of defaulted principal and accrued interest.

The complete rating actions are as follows:

Issuer: SLM Student Loan Trust 2005-10

Cl. A-5, Downgraded to Baa3 (sf); previously on Nov 1, 2016 Downgraded to Baa1 (sf)

Cl. B, Downgraded to Baa3 (sf); previously on Nov 1, 2016 Downgraded to Baa1 (sf)

Issuer: SLM Student Loan Trust 2006-1

Cl. A-5, Downgraded to Baa3 (sf); previously on Nov 1, 2016 Downgraded to Baa1 (sf)

Cl. B, Downgraded to Baa3 (sf); previously on Nov 1, 2016 Downgraded to Baa1 (sf)

Issuer: SLM Student Loan Trust 2006-3

Cl. A-5, Downgraded to Baa3 (sf); previously on Nov 1, 2016 Downgraded to Baa1 (sf)

Cl. B, Downgraded to Baa3 (sf); previously on Nov 1, 2016 Downgraded to Baa1 (sf)

Issuer: SLM Student Loan Trust 2007-2

Cl. A-3, Downgraded to Ba3 (sf); previously on Nov 1, 2016 Downgraded to Baa3 (sf)

Issuer: SLM Student Loan Trust 2007-3

Cl. A-3, Downgraded to Ba3 (sf); previously on Nov 1, 2016 Downgraded to Baa3 (sf)

Issuer: SLM Student Loan Trust 2007-6

Cl. A-4, Upgraded to Aaa (sf); previously on Nov 1, 2016 Downgraded to A1 (sf)

RATINGS RATIONALE

The upgrade for the SLM 2007-6 Class A-4 is primarily a result of Moody's analysis indicating that the expected losses of the tranche across Moody's cash flow scenarios are consistent with the expected loss benchmarks in Moody's idealized loss tables for the rating assigned in today's action for that transaction. Moody's derives the expected loss of each tranche by running its standard 28 cash flow scenarios and using the weights associated with each scenario.

The downgrades for Class A-5 and B in SLM Student Loan Trust 2005-10, 2006-1 and 2006-3 to Baa3 (sf) reflect the fact that the pool factor for these transactions has decreased to below 10% and Navient has not exercised its option to purchase the remaining student loans from the trusts to pay off the outstanding notes. In addition, there was no successful sale of the underlying student loan pools initiated by the indenture trustee.

The downgrades for the SLM Student Loan Trust 2007-2 Class A-3 and 2007-3 Class A-3 are primarily due to uncertainty that the cash flow available to make payments on the notes will be sufficient to make all required payments to the noteholders by the final maturity dates. The maturities for these tranches are in January 2019 and April 2019, respectively.

In its rating actions Moody's considered Navient's willingness and ability to protect the securities from being in default as of their final maturity dates. Except for the 10% clean-up calls, the rating downgrades do reflect additional ways Navient could support the securities from default as of their final maturity dates. Navient has amended all of the transactions subject to this rating action to add the ability to purchase an additional 10% of the initial pool balance. Navient has also amended all of the transactions subject to this rating action to establish a revolving credit facility that enables the trust to borrow money from Navient Corporation on a subordinated basis in order to pay off the notes.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was "Moody's Approach to Rating Securities Backed by FFELP Student Loans" published in August 2016. 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

Moody's could upgrade the ratings if the paydown speed of the loan pool increases as a result of declining borrower usage of deferment, forbearance and IBR, increasing voluntary prepayment rates, or prepayments with proceeds from sponsor repurchases of student loan collateral. Moody's could also upgrade the rating owing to a build-up in credit enhancement.

Down

Moody's could downgrade the ratings if the paydown speed of the loan pool declines as a result of low voluntary prepayments, and high deferment, forbearance and IBR rates, which would threaten full repayment of the classes by their final maturity dates. Moody's could also downgrade the rating if the protection from Navient is not materialized within a reasonable time frame. In addition, because the US Department of Education guarantees at least 97% of principal and accrued interest on defaulted loans, Moody's could downgrade the ratings of the notes if it were to downgrade the rating on the United States government.

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 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.

Andrew Miller
Asst Vice President - 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.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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