Fitch Ratings downgrades the ratings on the education loan revenue bonds issued by Vermont Student Assistance Corporation (VSAC) issued under the 1995 General Resolution. The rating is removed from Rating Watch Negative and a Stable Outlook is assigned to the bonds. A complete list of the ratings is shown below.
The rating downgrades are based on loss coverage multiples and on the level of credit enhancement that is available to absorb the applicable basis risk factor stress level after accounting for the trust's cost structure and its ability to generate excess spread towards the tail end of the transaction. Credit was given to the increased credit enhancement provided by VSAC's purchase of bonds at a discount since March 2010, as reflected by the trust's 107.03% senior parity ratio. Although senior bond payments are guaranteed by AMBAC Indemnity Corporation (AMBAC), no credit was given to this guarantee, as Fitch has withdrawn the ratings on AMBAC.
The collateral securing the bonds contains 78.27% Federal Family Education Loan Program (FFELP) Student Loans and 21.73% private student loans. For the portion of the trust backed by private student loans, loss coverage multiples were determined by comparing projected net loss amounts to available credit enhancement based on the collateral performance data as of Dec. 31, 2010. Credit enhancement includes overcollateralization, a reserve fund, and projected excess spread. Fitch assumed excess spread to be the lesser of the average historical excess spread (earning on the assets minus interest payments to bondholders and fees) and the most recent 12-month average excess spread, and applied that same rate over the stressed projection of remaining life.
In its analysis, Fitch used data provided by VSAC to form a loss timing curve for the transaction's loan pool. A projected net loss amount was compared to available credit enhancement to determine the loss multiple. 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 of the trust. A recovery rate was applied based on the latest data provided by the issuer. The collateral performance for the trust has been consistent with expectations from a net default perspective.
The trust may release cash to the issuer when senior parity is 103% or greater, and upon receiving approval from AMBAC. Fitch calculated the current loss coverage multiples based on the trust's current senior parity ratio of 107.03%. If any cash is released from the trust, this would decrease the current level of available credit enhancement and may cause further rating actions to be taken.
Fitch downgrades and assigns a Stable Outlook to Vermont Student Assistance Corporation 1995 General Resolution education loan revenue bonds:
--Series 1995-A downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 1995-B downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 1995-C downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 1996-F downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 1996-G downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 1996-H downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 1998-K downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 1998-L downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 1998-M downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2000-R downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2000-S downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2000-T downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2001-V downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2001-W downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2001-X downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2001-Y downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2001-Z downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2001-AA downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2002-BB downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2002-CC downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2002-DD downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2003-FF downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2003-GG downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2003-HH downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2003-II downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2003-JJ downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2003-KK downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2003-LL downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2004-MM downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2004-NN downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2004-OO downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2004-PP downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2005-RR downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2005-SS downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2006-UU downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2006-VV downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2007-WW downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2007-XX downgraded to 'AA-' from 'AA+', Stable Outlook;
--Series 2007-YY downgraded to 'AA-' from 'AA+', Stable Outlook.
The subordinate series 1998-O bonds have been paid in full.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'U.S. Private Student Loan ABS Criteria' Aug. 24, 2009;
--'Global Structured Finance Rating Criteria' dated Aug. 13, 2010;
--'Fitch to Begin Review of U.S. FFELP SLABS Applying Updated Criteria' dated June 29, 2010;
--'Rating US Federal Family Education Loan Program Student Loan ABS', dated April 11, 2008.
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=5...
U.S. Private Student Loan ABS Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=4...
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