Fitch Ratings has affirmed the senior student loan notes issued
by Brazos Higher Education Authority, Inc. - Amended and Restated
2004 Indenture Trust (1993B) series 2010-1 at 'AAAsf'. A full list
of rating actions follows at the end of this press release.
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. Fitch's U.S.
sovereign rating is currently 'AAA' with a Stable Outlook.
Collateral Performance: Fitch assumes a base case default rate
of 18.75% and a 56.25% default rate under the 'AAAsf' credit stress
scenario. The weighted average claim reject rate is assumed to be
0.25% in the base case and 2% in the 'AAAsf' case. Fitch applies
the standard default timing curve, in its credit cash flow
analysis. The trailing 12 month (TTM) average constant default rate
utilized in the Maturity stress is 3.37%. The TTM levels of
deferment, forbearance, Income-based repayment (before adjustment)
and constant prepayment rate (voluntary and involuntary) are 6.93%,
9.45%, 13.98% and 11.27% respectively, which are used as the
starting point in cash flow modelling. Subsequent declines or
increases are modelled as per criteria. The weighted average
borrower benefit is assumed to be approximately 0.31% based on
information provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis
and interest rate stresses to this transaction as per criteria.
Payment Structure: As of July 2016, senior parity ratio is
111.77%. The class A notes also benefit from subordination provided
by the class B notes. Liquidity support is provided by a Debt
Service Reserve account sized at its floor of $1,770,900.
Maturity Risk: Fitch's student loan ABS cash flow model
indicates that the notes are paid in full on or prior to the legal
final maturity dates under the commensurate rating scenario.
Operational Capabilities: Day-to-day servicing is provided by
Xerox Education Services LLC., Navient Solutions, Inc.,
Pennsylvania Higher Education Assistance Agency, and Nelnet
Servicing. Fitch believes all servicers are acceptable servicers of
FFELP student loans given their long servicing history.
Criteria Variations:
For transactions in surveillance, Fitch will treat certain
assets such as claims filed as short-term assets in its cash flow
analysis. Given that Fitch's current criteria is silent on the
treatment of such assets, this treatment is considered a criteria
variation.
Under the 'Counterparty Criteria for Structured Finance and
Covered Bonds', dated July 18, 2016, Fitch looks to its own ratings
in analyzing counterparty risk and assessing a counterparty's
creditworthiness. The definition of eligible investments for this
deal does not include Fitch's long-term rating for Commercial Paper
that matures in more than 30 days. This represents a criteria
variation. Fitch doesn't believe such variation has a measurable
impact upon the ratings assigned.
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.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in
relation to this rating action
Fitch has affirmed the following ratings:
Brazos Higher Education Authority 1993B Series 2010
--Class A-1 at 'AAA'; Outlook Stable;
--Class A-2 at 'AAA'; Outlook Stable.
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/site/re/884963
Criteria for Interest Rate Stresses in Structured Finance
Transactions and Covered Bonds (pub. 17 May 2016)
https://www.fitchratings.com/site/re/879815
Criteria for Servicing Continuity Risk in Structured Finance
(pub. 17 Dec 2015)
https://www.fitchratings.com/site/re/875586
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130
Rating U.S. Federal Family Education Loan Program Student Loan
ABS Criteria (pub. 26 Jul 2016)
https://www.fitchratings.com/site/re/881705
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010984
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010984
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY
FOLLOWING THIS LINK:
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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
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ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
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Fitch RatingsPrimary AnalystNicole
EdwardsDirector+1-212-908-9114Fitch Ratings, Inc.33 Whitehall
StreetNew York, NY 10004orCommittee ChairpersonTracy WanSenior
Director+1-212-908-9171orMedia Relations:Sandro Scenga,
+1-212-908-0278sandro.scenga@fitchratings.com