|[October 16, 2013]
Fitch Withdraws Expected Ratings of Kentucky Higher Ed Student Loan, Ser 2013-2; Pre-sale Retracted
NEW YORK --(Business Wire)--
Fitch Ratings has withdrawn the 'AAA(EXP)'with a Negative Outlook rating
assigned to the Kentucky Higher Education Student Loan Corporation
taxable LIBOR-indexed floating rate bonds, series 2013-2. The expected
rating was withdrawn as the transaction will be restructured and
Fitch's presale and Appendix of Representations and Warranties titled
'Kentucky Higher Education Student Loan Corporation Series 2013-2,'
dated August 6, 2013 has also been retracted.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of Federal Family
Education Loan Program (FFELP) loans including approximately 6.1% of
rehab 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.
Negative Rating Outlook : Fitch's Rating Outlook for all existing and
new issuances of 'AAA' rated tranches of FFELP securitizations is
Negative, which reflects Fitch's Negative Outlook on the long-term
foreign and local currency Issuer Default Ratings (IDRs) of the U.S.
prior to Oct. 15, 2013 where the IDR of the U.S. was placed on Rating
Sufficient Credit Enhancement: Cash flow scenarios for class A notes
were satisfactory under Fitch stresses. At closing, total parity is
expected to be 103.47%. Total credit enhancement (CE) is provided by
overcollateralization (OC) and excess spread.
Adequate Liquidity Support: Liquidity support for the series 2013-2
notes is provided by a 1.41 million reserve fund (0.25% of the initial
note balance) and an $8 million capitalized interest account, both of
which are funded at closing with note proceeds.
Acceptable Servicing Capabilities: KHESLC will service the entire 2013-2
portfolio, and Nelnet Servicing LLC will be the back-up servicer. Fitch
believes that both servicers are acceptable servicers of FFELP student
Since FFELP student loan ABS (News - Alert) rely on the U.S. government to reimburse
defaults, 'AAAs'f 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.
Likewse, a buildup of credit enhancement driven by positive excess
spread given favorable basis factor conditions could lead to future
upgrades. For further discussion of Fitch's sensitivity analysis, please
see the presale titled 'KHESLC 2013-2', dated Aug. 6, 2013.
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' (May 17, 2013);
--'Representations, Warranties and Enforcement Mechanism in Global
Structure Finance Transactions' (April 17, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Rating U.S. Federal Family Education Loan Program Student Loan ABS
Criteria - Effective Apr. 7, 2011 to Apr. 3, 2012
Representations, Warranties, and Enforcement Mechanisms in Global
Structured Finance Transactions -- Amended
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON (News - Alert) 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
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