Fitch Affirms SLM Student Loan Trust 2013-5; Outlook Negative on Class A-3 and B

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the senior notes for SLM Student Loan Trust 2013-5 at 'AAAsf' and subordinate note at 'A+sf'. The Rating Outlook remains Stable for classes A-2. Fitch has revised the Outlook for class A-3 and B to Negative from Stable.

The Outlook revision for class A-3 is due to Fitch's belief that the note carries a heightened level of extension risk. Based on Fitch's cash flow modelling runs, the note was not paid in full by its legal final maturity date of Oct. 25, 2027 in a stressed scenario. Under such scenarios, this may result in a technical default, although Fitch would expect ultimate repayment of full principal and interest afterwards. If a default occurs for the class A-3, it is highly likely that the class B note will not receive timely interest, as the principal for the class A notes must be paid in full prior to the class B note receiving interest. Therefore, the Outlook on the subordinate note is revised to Negative.

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. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread, and for the senior notes, subordination of the class B note. As of July 2015, total parity is 101.01% (1.00% CE) and senior parity is 104.72% (4.51% CE). The trust has been releasing cash given the specified OC amount of the greater of 1% of the adjusted pool balance and $1,250,000 is maintained.

Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund currently sized at the greater of 0.25% of the pool balance and $998,874.

Acceptable Servicing Capabilities: Day-to-day servicing is provided by Navient Corporation. Fitch believes Navient is an acceptable servicer 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 build-up of credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

DUE DILIGENCE USAGE

Fitch was not provided due diligence information from any third parties relating to the SLM Student Loan Trust 2013-5.

Fitch has affirmed the following:

SLM Student Loan Trust 2013-5

--Class A-2 at 'AAAsf'; Outlook Stable;

--Class A-3 at 'AAAsf'; Outlook to Negative from Stable;

--Class B at 'A+sf'; Outlook to Negative from Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530

Related Research

SLM Student Loan Trust 2013-5 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718046

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990324

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990324

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Fitch Ratings
Primary Analyst
Paul Jiang
Associate Director
+1-212-908-9120
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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