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TMCNet:  Fitch Affirms Federated Student Finance Corporation's Senior Notes; Outlook Stable

[April 08, 2014]

Fitch Affirms Federated Student Finance Corporation's Senior Notes; Outlook Stable

NEW YORK --(Business Wire)--

Fitch Ratings has affirmed the senior class series 2010A-1 notes for Federated Student Finance Corporation at 'AAAsf', and maintains the Stable Rating Outlook. On March 20, 2014, Fitch removed all senior class notes from Rating Watch Negative and assigned Stable Outlooks. The notes are currently rated 'AAAsf' and backed by collateral consisting of Federal Family Education Loan Program (FFELP) student loans.

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. 'AAAsf' rated tranches of U.S. FFELP student loan ABS (News - Alert) were assigned Stable Outlooks and removed from Rating Watch Negative to reflect the revision of the U.S. sovereign rating on March 20, 2014.

Sufficient Credit Enhancement

Credit Enhancement is provided by overcollateralization (OC), or the excess of the trust's asset balance over the note principal balance and excess spread. Fitch Ratings only rates the senior notes issued by the Federated Student Finance Corporation, Series 2010A-1. The senior parity ratio is rising and is currently 107.43% as of Feb. 28, 2014.

Adequate Liquidity Support

Liquidity is provided by a reserve account sized at the greater of 1.0% of the current pool balance and $500,000.

Acceptable Servicing Capabilities

Servicing will be provided by AES, the commercial servicing division for Pennsylvania Higher Education Assistance Agency PHEAA), Sallie Mae Servicing Inc., ACS (News - Alert) Commercial Education Services, a servicing division of the Xerox Corporation, and Great Lakes Educational Loan Services Inc., which Fitch deems to have satisfactory servicing operations 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. Aide 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 affirms the following ratings:

Federated Student Finance Corporation:

--Series 2010A-1 notes at 'AAAsf'; Outlook Stable.

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).

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 - Effective Apr. 7, 2011 to Apr. 3, 2012

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=616766

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826419

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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