Fitch Rates Navient Student Loan Trust 2016-5; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings rates Navient Student Loan Trust 2016-5 as follows:

--$1,008,000,000 floating rate class A notes 'AAAsf'; Outlook Stable.

KEY RATING DRIVERS

U.S. Sovereign Risk: The trust collateral comprises Federal Family Education Loan Program (FFELP) loans, 100% of which are rehab loans, with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The U.S. sovereign rating is currently 'AAA'/Stable Outlook.

Collateral Performance: Fitch assumes 48.25% base case default rate and 100% under 'AAA' credit stress scenario. The claim reject rate is assumed to be 0.5% in base case and 3.0% in 'AAA' case. Fitch applies the standard default timing curve, CDR and prepayment assumptions for rehab FFELP loans in its cash flow analysis. Current level of deferment, forbearance and IBR are 5.7%, 20.6%, and 15.8% respectively, which are used as the starting point in cash flow modelling. Subsequent declines or increases are modelled as per criteria. The borrower benefit is assumed to be 0%.

Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this transaction as per criteria.

Payment Structure: Cash flow scenarios for the 2016-5 notes were satisfactory under 'AAAsf' stress using Fitch's Student Loans ABS cash flow model (SLABS). Total credit enhancement (CE is provided by overcollateralization and excess spread' and at closing, total parity is expected to be 104.60%. Liquidity support for the 2016-5 notes is provided by a reserve fund sized at $38,107,928 million to be funded at closing with note proceeds, with a specified reserve requirement of 3.75% on any distribution date prior to Dec. 25, 2017, and 1.5% for any distribution date after Dec. 25, 2017 but prior to June 25, 2019. Thereafter, the requirement will be the greater of 0.25% of outstanding pool balance and 0.10% of the initial pool balance. Excess spread must build to the greater of: 5.5% of the adjusted pool balance and $5 million before excess cash may be released from the trust.

Maturity Risk: Fitch's SLABS cash flow model indicates that the notes are paid in full on or prior to the legal final maturity of June 25, 2065 in AAA maturity stress scenario.

Operational Capabilities: Navient Solutions, Inc. (Navient) is the servicer, servicing 100% of the 2016-5 portfolio. Navient is also the administrator. Fitch deems Navient to be an acceptable servicer of FFELP 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.

Key Rating Drivers and Rating Sensitivities are further described in the updated presale report titled 'Navient Student Loan Trust 2016-5', dated July 25, 2016 available on www.fitchratings.com, or by clicking on the link.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879815

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 26 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=881705

Related Research

Navient Student Loan Trust 2016-5 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885669

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010262

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010262

Endorsement Policy

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

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160811005879/en/

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Harry Kohl
Director
+1-212-908-0837
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• CreditRiskMonitor Announces Second Quarter Results
• SerpApi Surpasses 1.5 Million Activated User Accounts, Empowering Developers Everywhere with Structured Access to the World's Search Data
• Hyve Solutions Selects Nevada for Advanced Manufacturing Campuses in Reno and North Las Vegas