Fitch: VSAC, student loan asset-backed notes, series 2013-1; presale issued

Fitch Ratings expects to rate Vermont Student Assistance Corporation, student loan asset-backed notes, series 2013-1 (taxable LIBOR FRNs) as follows:
--$371,400,000 senior A notes 'AAAsf(EXP)'; Outlook Negative;
--$7,000,000 subordinate B notes 'Asf(EXP)'; Outlook Stable.
Link to Fitch Ratings' Report: Vermont Student Assistance Corporation, Student Loan Asset-Backed Notes, Series 2013-1 (US ABS)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=7...
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on guarantees provided by the transaction's eligible guarantors and at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED).
Negative Rating Outlooks Assigned: Fitch's Rating Outlook for all existing and new issuances of 'AAA' rated tranches of FFELP securitizations remains Negative, which reflects Fitch's Negative Rating Outlook on the long-term foreign and local currency Issuer Default Ratings (IDRs) of the U.S.
Sufficient Credit Enhancement: Fitch reviewed transaction cash flows that were stressed at levels commensurate with Fitch's 'AAA' and 'A' rating categories for the senior and subordinate notes. The cash flow results were satisfactory under all stress scenarios for the senior and subordinate class notes. Credit enhancement (CE) is provided by overcollateralization (OC) and excess spread. At closing, the senior and total parity are expected to be 103.5% and 101.6%, respectively.
Adequate Liquidity Support: Liquidity support for series 2013-1 notes is provided by a $958,843 reserve account funded at closing with note proceeds. The reserve account is required to maintain the greater of 0.25% of the current pool balance or $560,543 (or 0.15% of the initial pool balance).
Acceptable Servicing Capabilities: VSAC (or the corporation) will be the servicer and administrator, and Nelnet Servicing LLC (Nelnet) will be the backup servicer for the transaction. Fitch has reviewed the servicing operations of VSAC and Nelnet and believes them to be acceptable servicers of FFELP student loans.
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. For further discussion of our sensitivity analysis, please see the related presale report, 'Vermont Student Assistance Corporation, Student Loan Asset-Backed Notes, Series 2013-1' (June 2013).
Fitch's stress analysis is discussed in the presale titled 'Vermont Student Assistance Corporation, Student Loan Asset-Backed Notes, Series 2013-1' (June 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);
--'Structured Finance Tranche Thickness Criteria' (July 29, 2011).
--'Representations, Warranties and Enforcement Mechanism in Global Structure Finance Transactions' (April 17, 2012)
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=7...
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=6...
Structured Finance Tranche Thickness Metrics
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=6...
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=793310
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 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.
NEW YORK--(BUSINESS WIRE)