NEW YORK–(BUSINESS WIRE)–Fitch Ratings downgrades the class A notes and affirms the class B and C
notes of the National Collegiate Student Loan Trust 2004-2 (NCSLT
2004-2). In addition, Fitch affirms all the remaining 11 private student
loan asset-backed notes issued by First Marblehead. The Negative Outlook
is maintained on all of the notes rated above ‘CCCsf’. Fitch’s ‘U.S.
Private SL ABS Criteria’ and ‘Global Structured Finance Rating Criteria’
were used to review the ratings. The rating actions are detailed at the
end of this press release.
KEY RATING DRIVERS
Collateral Quality: All trusts are collateralized by private student
loans originated by various financial institutions and lenders. The
performance of the loans continues to deteriorate from the last review
and as such, default projections have increased. At deal inception all
loans were guaranteed by The Education Resources Institute (TERI);
however, no credit was given to the TERI guaranty, since TERI filed for
bankruptcy on April 7, 2008.
Credit Enhancement: Credit enhancement is provided by
overcollateralization and excess spread. The class A, B and C notes also
benefit from subordination. Based on the projected remaining defaults
for all trusts that range from 20% to 60%, all outstanding notes have
sufficient loss coverage to maintain the current ratings.
Liquidity Support: Liquidity support for the notes is provided by a
reserve account for each trust.
Acceptable Servicing Capabilities: The portfolio is serviced by PHEAA.
Fitch believes PHEAA is an acceptable servicer of private student loans.
The Outlook remains Negative on non-distressed ratings in NCSLT 2003-1,
2004-2 and 2005-1, where the trusts continue to experience high default
levels in excess of Fitch’s initial expectations.
For each trust, Fitch conducted a review of the collateral performance
that involved the calculation of loss coverage multiples based on the
most recent variables. A projected net loss amount was compared to
available credit enhancement to determine the loss multiples. Fitch used
historical vintage loss data previously provided by First Marblehead
Corporation in addition to other analytical methods seen as fit to form
a loss timing curve representative of the private student loan
collateral pools of each trust. After giving credit for seasoning of
loans in repayment, Fitch applied the current cumulative gross loss
level to this loss timing curve to derive the expected gross losses over
the remaining life for each trust. A recovery rate of 25% was applied,
which was determined to be appropriate based on the latest data provided
by the issuer.
The available credit enhancement for the trusts consists of excess
spread, overcollateralization (if any), and subordination where
applicable.
Fitch also applied a Recovery Estimate (RE) to classes rated ‘CCC’ or
below as these ratings classify these notes as distressed SF securities.
Fitch has calculated an RE for each which represents Fitch’s calculation
of expected principal recoveries, as a percentage of current note
principal outstanding. Each of the notes rated ‘CCC’ or below was
assigned an RE respectively, given Fitch’s calculation.
The collateral supporting each trust consists entirely of private
student loans originated by various financial institutions and lenders.
Loan proceeds are used by students to assist in financing the cost of
attending undergraduate, law school, business school, medical school,
dental school, and other graduate programs. In November 2012, First
Marblehead Education Resources, a subsidiary of First Marblehead
resigned as special servicer and U.S. Bank, the backup special servicer
for all trusts assumed the role.
RATING SENSITIVITIES
As Fitch’s base case default proxy is derived primarily from historical
collateral performance, actual performance may differ from the expected
performance, resulting in higher loss levels than the base case. This
will result in a decline in credit enhancement and remaining loss
coverage levels available to the notes and may make certain note ratings
susceptible to potential negative rating actions, depending on the
extent of the decline in coverage.
Please see the attached rating action report for a full list of rating
actions.
Additional information is available at ‘www.fitchratings.com‘.
Applicable Criteria and Related Research:
–‘U.S. Private Student Loan ABS Criteria’, January 29, 2014;
–‘Global Structured Finance Rating Criteria’, August 4, 2014.
Applicable Criteria and Related Research: Fitch Takes Various Rating
Actions on 12 National Collegiate Student Loan Trust Transactions
U.S. Private Student Loan ABS Criteria
Global Structured Finance Rating Criteria
Additional Disclosure
Solicitation Status
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: http://bit.ly/1pv8DLU.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF
THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE
RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
WEBSITE.
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