Fitch Takes Various Actions on Two Navient Trusts

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has taken the following rating actions on SLM Student Loan Trust 2003-12 and SLM Student Loan Trust 2006-2, administered by Navient:

SLM Student Loan Trust 2003-12:

--Class A-5 affirmed at 'AAAsf'; Outlook Stable;

--Class A-6 'AAAsf'; Rating Watch Negative maintained;

--Class B affirmed at 'BBBsf'; Outlook Stable.

SLM Student Loan Trust 2006-2:

--Class A-5 affirmed at 'AAAsf'; Outlook Stable;

--Class A-6 'AAAsf'; Rating Watch Negative maintained;

--Class B affirmed at 'Asf'; Outlook Stable.

KEY RATING DRIVERS

Collateral Quality: SLM 2003-12 and SLM 2006-2 are backed by 100% Federal Family Education Loan Program (FFELP) 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 for the FFELP loans. The U.S. is currently rated 'AAA'/Outlook Stable.

Credit Enhancement (CE): CE is provided by excess spread and, for the class A notes only, subordination of the class B notes. As of February 2016, Fitch calculated effective total parity for SLM 2003-12 (which includes the reserve fund) is 100.43% (0.43% CE) and senior parity is 105.25% (4.99% CE). Cash is being released from the trust given that 100% total parity (excluding the reserve, as pool factor is below 40%) is maintained. As of March 2016, senior and total parity ratios for SLM 2006-2 are 104.43% (4.24% CE) and 100.00%, respectively. The trust will continue to release cash as long as the target total parity ratio of 100% is maintained.

Liquidity support: Liquidity support for the series 2003-12 and series 2006-2 notes is provided by reserve accounts, sized at 0.25% of the adjusted pool balance, with floors of $3,759,518 for SLM 2003-12 and $4,524,614 for SLM 2006-2. The reserve accounts for both trusts are currently equal to their respective floors.

Servicing Capabilities: Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.) is the servicer of the trusts' student loan pools. In Fitch's opinion, Navient Solutions, Inc. is an acceptable servicer of FFELP student loans.

On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria. Fitch will address the rating watch statuses after the finalized criteria report has been published.

RATING SENSITIVITIES

Since the FFELP student loan ABS relies 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, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

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. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 04 Dec 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874971

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1003968

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003968

Endorsement Policyhttps://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/20160504006265/en/

Fitch Ratings
Primary Analyst:
Eric Orenstein, +1-646-582-4816
Analyst
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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