Fitch Takes Various Actions on Two SLC Trusts

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has taken the following rating actions on SLC Student Loan Trust 2007-1 and SLC Student Loan Trust 2007-2:

SLC Student Loan Trust 2007-1:

--Class A-3 affirmed at 'AAAsf'; Outlook Stable;

--Class A-4 'AAAsf' placed on Rating Watch Negative;

--Class A-5 'AAAsf' placed on Rating Watch Negative;

--Class B 'Asf' placed on Rating Watch Negative.

SLC Student Loan Trust 2007-2:

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

--Class A-3 'AAAsf' placed on Rating Watch Negative;

--Class B 'Asf' placed on Rating Watch Negative.

KEY RATING DRIVERS

Maturity Risk: The Rating Watch Negative action is based on the heightened risk of SLC 2007-1 class A-4, A-5, and B and SLC 2007-2 class A-3 and B notes missing their legal final maturities of May 15, 2029, May 15, 2037, Aug. 15, 2037, May 15, 2040, and Feb. 15, 2041 respectively, which would result in an event of default. In an event of such technical default, Fitch would expect ultimate repayment of full principal and interest after the legal final. The magnitude of the rating action could vary depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors. Absent any issuer actions, structural or other mitigants, it is possible that 'AAA' ratings could be downgraded to non-investment grade rating categories. Fitch expects to complete its review and resolve the Rating Watch status over the next three to six months.

Collateral Quality: SLC 2007-1 and SLC 2007-2 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: Credit Enhancement is provided by excess spread and for the class A notes, subordination of the class B notes. As of October 2015, senior and total parity ratios for SLC 2007-1 are 105.38% (5.11% CE) and 100.00%, respectively. As of October 2015, senior and total parity ratios for SLC 2007-2 are 105.12% (4.87% CE) and 100.00%, respectively. The trusts will continue to release cash as long as the target total parity ratio of 100% is maintained.

Liquidity support: Liquidity support for the SLC 2007-1 and SLC 2007-2 notes is provided by reserve accounts, sized at 0.25% of the adjusted pool balance, with floors of $1,822,106 for SLC 2007-1 and $2,550,668 for SLC 2007-2. 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, which has resulted in placing the SLC 2007-1 class A-4, A-5, and B notes and the SLC 2007-2 class A-3 and B notes on Rating Watch Negative.

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.

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

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 -- Amended (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 Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996491

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996491

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/20151210006248/en/

Fitch Ratings
Primary Analyst
Primary Analyst
Harry Kohl
Associate Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Michael Dean
Managing Director
+1-212-908-0556
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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