Fitch Ratings said on November 1 that it downgraded the Class A and B ratings of three SLM Student Loan Trust (SLM) transactions unless the sponsor, Navient, accelerates or the final rating due date. class A is extended. The rating agency also downgraded the Class B notes to default status in a separate SLM Student Loan Trust agreement.
The final legal maturity date for Class A-4 bonds is January 2022 for SLM 2007-7 and SLM 2008-1, and 10 months for SLM 2008-4. Fitch Says Repayment Within These Timeframes Is Unlikely In “Credit Rating Agency Maturity Stress Scenarios Without An Extension Of The Class A-4 Legal Final Due Date Or Without Sponsor Support “.
The ratings were downgraded from ‘Bsf’ with a negative outlook to ‘CCsf’.
In a cascading effect, Fitch says that Class A tickets missing their legal final maturity dates would constitute an event of default on the deed of each transaction, resulting in interest being diverted from the Class B tickets to pay for the tickets. class A until paid in full.
Class B grades have also been downgraded from ‘Bsf’ with a negative grade to ‘CCsf’.
“This would also cause the Class B notes to default,” Fitch said, adding, “These classes are ultimately paid in full according to Fitch’s stressful cash flow analysis.
Help can come from the sponsor, Navient. Each of the three trusts has entered into a revolving credit agreement with Navient, allowing it to borrow funds at maturity in order to repay the notes. However, according to Fitch, due to the short time until the legal final maturity of Class A notes, this diminished the “quality credit” of revolving credit agreements.
“If this revolving credit facility is used, it will put positive pressure on the rating of these transactions,” said Fitch. “In addition, Navient sought investor consent to extend the legal final due dates for these transactions, which, if approved by 100% of shareholders, would also result in positive rating actions.”
In addition, Fitch announced on the same day the downgrading of the outstanding ratings from SLM 2008-3 to “Dsf” from “CCCsf”, indicating a default on the senior notes in the payment of their principal outstanding at their due date. legal deadline of October 15.