Approximately $2.2 billion of asset-backed securities affected
New York, February 27, 2009 -- Moody's Investors Service completed its review of the underlying
ratings of 34 bonds issued by two Michigan Higher Education Student Loan
Authority trusts. All bonds are guaranteed by Ambac Assurance Corporation
whose insurance financial strength rating is Baa1 with a developing outlook.
According to Moody's policy, securities insured by financial guarantors
are rated at the higher of the guarantor's insurance financial strength
rating and the underlying rating, which reflects the intrinsic credit
quality of the bonds in the absence of the guarantee.
The A3 and A1 ratings assigned respectively to the Series XII and Series
XVII bonds are based on the credit enhancement available and structural
protections in the transactions. As of September 30, 2008,
70% and 88% of the trusts' liabilities were funded
by auction rate notes for Series XII and Series XVII respectively.
Both trusts have experienced significant increase in funding cost due
to the prolonged and continuing dislocations in the Student Loan Auction
Rate Securities (SLARS) market. The trusts have suffered excess
spread compression as the yield on the assets did not increase in tandem
with the cost of the liabilities. At the failed auction rate,
Series XII is expected to generate -30bps negative excess spread
while Series XVII is expected to generate 30-40bps excess spread
per annum prior to any loss on the private loans. The two trusts
were overcollateralized by 3.11% and 1.03%
(i.e. total parity, or the ratio of total assets to
total liabilities was 103.11% and 101.03%)
as of September 30, 2008. The total credit enhancement and
the structure of the transaction are consistent with similar transactions
in the same rating category.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found at www.moodys.com
in the Credit Policy & Methodologies directory.
The complete rating actions are as follows:
Issuer: Michigan Higher Education Student Loan Authority (Series
XII)
00 Ser. XII-T-4, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed
Under Review for Possible Downgrade
00 Ser. XII-T-5, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed
Under Review for Possible Downgrade
00 Ser. XII-U, Downgraded to A3; previously on
11/17/2008 Upgraded to Aaa and Placed
Under Review for Possible Downgrade
01 Ser. XII-W-4, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed
Under Review for Possible Downgrade
01 Ser. XII-W-5, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed
Under Review for Possible Downgrade
03 Ser. XII-Z1, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed Under
Review for Possible Downgrade
00 Ser. XII-Z2, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed Under
Review for Possible Downgrade
03 Ser. XII-Z3, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed Under
Review for Possible Downgrade
99 Ser. XII-Q4, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed
Under Review for Possible Downgrade
99 Ser. XII-Q5, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed
Under Review for Possible Downgrade
99 Ser. XII-R-1, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed Under Review for Possible Downgrade
99 Ser. XII-R-2, Downgraded to A3; previously
on 11/17/2008 Upgraded to Aaa and Placed
Under Review for Possible Downgrade
96 Ser. XII-N, Downgraded to A3; previously on
11/17/2008 Upgraded to Aaa and Placed Under Review for Possible Downgrade
Issuer: Michigan Higher Education Student Loan Authority (Series
XVII)
XVII-A, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-B, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-D, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-E, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-F, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-G, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-H-1, Downgraded to A1; previously on 11/17/2008
Aa3 Placed Under Review with Direction of uncertain
XVII-H-2, Downgraded to A1; previously on 11/17/2008
Aa3 Placed Under Review with Direction of uncertain
XVII-H-3, Downgraded to A1; previously on 11/17/2008
Aa3 Placed Under Review with Direction of uncertain
XVII-H-4, Downgraded to A1; previously on 11/17/2008
Aa3 Placed Under Review with Direction of uncertain
XVII-H-5, Downgraded to A1; previously on 11/17/2008
Aa3 Placed Under Review with Direction of uncertain
XVII-H-6, Downgraded to A1; previously on 11/17/2008
Aa3 Placed Under Review with Direction of uncertain
XVII-I, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-J, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-K, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-L, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-M, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-N, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-O, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction of uncertain
XVII-P, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with Direction
XVII-Q, Downgraded to A1; previously on 11/17/2008 Aa3
Placed Under Review with of uncertain
For more information please see www. Moodys.com
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
JingJing Dang
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's takes rating actions on thirty four classes of Michigan student loan revenue bonds