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TMCNet:  Fitch Maintains Negative Rating Watch on N Carolina State Ed Assistance Authority, Series 2013-1

[January 08, 2014]

Fitch Maintains Negative Rating Watch on N Carolina State Ed Assistance Authority, Series 2013-1

NEW YORK --(Business Wire)--

Fitch Ratings maintains the Negative Rating Watch on the notes currently rated 'AAAsf' issued by North Carolina State Education Assistance Authority, Series 2013-1.

KEY RATING DRIVERS

High Collateral Quality: The collateral consists of 100% of Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest.

Rating Watch Maintained: 'AAAsf' rated tranches of U.S. FFELP student loan ABS (News - Alert) are maintained on Rating Watch Negative following the revision of the U.S. sovereign rating on Oct. 15, 2013.

Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of September 2013, parity is at 103.80%. The parity ratio should continue to rise until a Specified Overcollateralization Amount of greater than 110% parity or $7,500,000 OC is met.

Adequate Liquidity Support: Liquidity support is provided by a Debt Service Reserve Fund currently sized at $1,298,028 and a Capitalized Interest Fund currently sized at $950,000 as of September 2013.

Acceptable Servicing Capabilities: College Foundation, Inc. is responsible for day-to-day servicing of the trust. Fitch believes College Foundation, Inc. is an acceptable servicer of FFELP student loans. Nelnet Servicing, LLC is the backup servicer.

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 CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Initial Key Rating Drivers and Rating Sensitivity are further described in the Presale report published on Jan. 10, 2013.

Fitch has taken the following rating actions:

North Carolina State Education Assistance Authority, Series 2013-1:

--Class A note at 'AAAsf', Negative Rating Watch maintained.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' dated May 24, 2013;

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated May 17, 2013.

A comparison of the transaction's RW&Es to those of typical RW&Es for student loans is available by accessing the reports and links below:

--'State of North Carolina State Education Assistance Authority, Series 2013-1 - Appendix', dated Jan. 10, 2013;

--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended', dated April 17, 2012.

Applicable Criteria and Related Research:

Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676496

State of North Carolina State Education Assistance Authority, Series 2013-1 -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698714

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

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=813730

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. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE 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 WEBSITE.


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