Fitch Ratings affirms the 'AAAsf' ratings assigned to the senior student loan asset-backed notes issued by the NorthStar Student Loan Trust I, Series 2012-1 (NorthStar 2012-1). The Rating Outlook on the notes, which is tied to the sovereign rating of the U.S. government, remains Negative. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS:
Adequate Collateral Quality: As of August 31, 2013, the trust collateral consisted of approximately $595 million of Federal Family Education Loan Program (FFELP) loans with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The loans were originated by NorthStar Education Finance, Inc.
Sufficient Credit Enhancement (CE): The affirmation is based on the sufficient level of credit enhancement to cover applicable risk factor stresses. CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. The parity ratio (total assets to senior liabilities) is currently 104.96% including the Reserve Account and is expected to build over time. The trust is in turbo and there is no cash released from the trust. In Fitch's analysis, the notes passed the cash flows corresponding to their rating stresses.
Adequate Liquidity Support: Liquidity support is provided by reserve account which is equal to the greater of 0.25% of the outstanding notes, and 0.15% of the initial note balance. The Capitalized Interest Account had a balance of $2 million till Sept. 25, 2013 and the Collection Account must retain a balance of $2 million until Sept. 25, 2015, before those funds can be released to pay down notes.
Satisfactory Servicing Capabilities: Day-to-day servicing is provided by Great Lakes Educational Loan Services, Inc. which is not rated Fitch. Fitch believes the servicing operations are acceptable at this time.
RATING SENSITIVITIES
Since FFELP student loan ABS rely on the U.S. government to reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the 'AAA' U.S. sovereign rating. Aside from the U.S. sovereign rating, defaults and basis risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults and basis shock beyond Fitch's published stresses could result in future downgrades. Likewise, a buildup of credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'NorthStar Student Loan Trust I, Series 2012-1 Representations and Warranties Presale Appendix', dated Oct. 10, 2012. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated April 17, 2012.
Fitch has affirmed the following ratings:
NorthStar Student Loan Trust I, Student Loan Asset-Backed Notes, Series 2012-1:
--Class A at 'AAAsf'; Outlook Negative.
Additional information is available at ' www.fitchratings.com'
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (Jan. 9, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=804699
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Fitch RatingsPrimary Analyst:Jeffrey Prackup, +1-212-908-0839DirectorFitch Ratings, Inc.One State Street PlazaNew York, NY 10004orSecondary Analyst:Harry Kohl, +1-212-908-0837Associate DirectororCommittee Chairperson:Tracy Wan, +1-212-908-9171Senior DirectororMedia Relations:Sendhil Selvaraj, +44 (0) 207 682 7218sendhil.selvaraj@fitchratings.com
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