Fitch to Rate SLM Student Loan EDC Repackaging Trust 2013-M1; Presale Issued
NEW YORK -- April 11, 2013
Fitch Ratings expects to rate SLM Student Loan EDC Repackaging Trust 2013-M1
--$225,000,000 fixed rate class M notes, 'BBBsf(EXP)'; Outlook Stable.
KEY RATING DRIVERS
Ratings on the Underlying Trusts: Fitch currently rates the senior and
subordinate notes issued from the underlying trusts 'AAAsf'/Outlook Negative
and 'BBBsf'/Outlook Stable, respectively. Since excess cash can only be
released from the underlying trusts after interest and principal payments are
made to the senior and subordinate notes, Fitch does not expect the ratings on
the class M notes to be higher than the ratings on the subordinate notes of
the underlying trusts. However, the rating of the class M notes is not
directly linked to the ratings of the underlying subordinate notes.
High Collateral Quality of the Underlying Trusts: The underlying trusts are
collateralized by consolidation loans originated under the Federal Family
Education Loan Program (FFELP), with guaranties provided by the U.S.
Department of Education (ED) for at least 97% of principal and accrued
Stable Performance of the Underlying Trusts: The underlying trusts have been
generating more than 100 basis points (bps) of annualized excess spreads since
late 2009. The excess spreads came under pressure during the financial crisis
due to basis risk spikes but remained in the positive territory. Prepayments
have remained relatively low with the exception of two periods of heightened
levels driven by one-off regulatory events.
Sufficient Credit Enhancement: While there will be no hard credit enhancement
for the class M notes, Fitch expects that the excess cash released from the
underlying trusts will be sufficient to cover interest and principal payments
of the class M notes under Fitch's 'BBBsf' stresses.
Adequate Liquidity Support: Liquidity support for the class M notes will be
provided by a reserve account, which will be fully funded at closing and
maintained at 6.3% of the outstanding balance of the class M notes, or
$800,000, whichever is higher.
Acceptable Servicing Capabilities: Sallie Mae, Inc., as servicer, will be
responsible for servicing the three underlying trust. Fitch believes Sallie
Mae is an acceptable servicer of FFELP student loans.
Fitch does not expect the ratings on the class M notes to be higher than the
ratings on the subordinate notes of the underlying trusts. However, the rating
of the class M notes is not directly linked to the ratings of the underlying
subordinate notes, i.e. an upgrade to the underlying subordinate notes does
not automatically lead to an upgrade to the class M notes.
Fitch conducts a sensitivity analysis for each deal by stressing prepayments
and basis spread between 3ML and 1ML. Increases of 50% and 100% are applied to
the base case prepayment rate (7.5%). Separately, increases of 7.5 bps and 15
bps are applied to the base case basis spread (1 bp).
Fitch's stress analysis is discussed in the presale titled 'SLM Student Loan
EDC Repackaging Trust 2013-M1', dated April 11, 2013.
The presale report is available to all investors on Fitch's website at
'www.fitchratings.com'. For more information about Fitch's comprehensive
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Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS
Criteria' (April 3, 2012);
--'Representations, Warranties and Enforcement Mechanism in Global Structure
Finance Transactions' (April 17, 2012).
Applicable Criteria and Related Research SLM Student Loan EDC Repackaging
Trust 2013-M1 (US ABS)
Global Structured Finance Rating Criteria
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria
Representations, Warranties, and Enforcement Mechanisms in Global Structured
Finance Transactions -- Amended
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Melvin Zhou, +1-212-908-0503
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Mike Dean, +1-212-908-0556
Sandro Scenga, +1-212-908-0278 (New York)
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