NEW YORK - (Business Wire) Fitch Ratings downgrades three subordinate classes and places all classes on Rating Watch Negative from the Federal Family Education Loan Program (FFELP) student loan asset-backed notes issued by the Illinois Student Assistance Commission (ISAC) 2002 General Resolution. The trust is under-collateralized and under significant stress with negative excess spread and declining parity. The Global SF Rating Criteria were used to review the transaction. The rating actions are tied to deteriorating trust performance with continuous decline in trust parity over the past 18 months. As of the June 2009 Distribution Report, the total parity has declined to 98.37% due to high trust expenses which are currently approximately 1.2% with a cap of 1.9%. Increased cost associated with the failed auction of the auction-rate securities has also put stress on the trust.
The subordinate bonds are particularly under pressure because they do not benefit from any credit enhancement. Although the senior classes benefit from a parity ratio of 106.83%, they are also under pressure as the ratio has steadily declined. The senior classes are not being paid down, so the parity decline has been in step with the trust parity decline. Both senior and subordinated classes will be on Rating Watch Negative, as any continued deterioration is expected to cause additional downgrades.
The subordinate classes were put on Rating Watch Negative in December 2008 after the issuer informed Fitch of inaccuracies in the reported parity calculations. The reporting issue has been resolved but the analysis based on updated information was the basis for the most recent rating actions.
The collateral supporting the bonds consists of federally guaranteed loans originated under the FFELP. FFELP loans are guaranteed by an eligible guarantor to at least 97% of principal and accrued interest, depending on loan origination date. The FFELP loans are also reinsured by the U.S. Department of Education up to the same amounts.
The student loan portfolio is serviced by ISAC acting through the Illinois Designated Account Purchase Program, Nelnet Loan Servicers Inc., ACS Education Services Inc,(ACS), Sallie Mae Servicing L.P., National Education Servicing LLC., Great Lakes Educational Loan Services, Inc. (GLELSI), Educational Services of America, Inc., and American Education Services/Pennsylvania Higher Education Assistance Agency. Fitch only rates GLELSI, ACS and Sallie Mae all of which are rated 'Proficient Plus'.
Fitch places the following senior classes on Rating Watch Negative:
Illinois Student Assistance Commission 2002 General Resolution (IL) 2002
--Class I-3 'AAA/LS1'.
Illinois Student Assistance Commission 2002 General Resolution (IL) 2003
--Class IV-1 'AAA/LS1';
--Class IV-3 'AAA/LS1'.
Illinois Student Assistance Commission 2002 General Resolution (IL) 2004
--Class VI-3 'AAA/LS1'.
Illinois Student Assistance Commission 2002 General Resolution (IL) 2005
--Class VIII-1 'AAA/LS1';
--Class VIII-2 'AAA/LS1';
--Class VIII-3 'AAA/LS1';
--Class VIII-4 'AAA/LS1';
--Class VIII-5 'AAA/LS1';
--Class VIII-6 'AAA/LS1';
--Class VIII-7 'AAA/LS1';
--Class VIII-8 'AAA/LS1'.
Additionally, Fitch downgrades the following subordinate notes and maintains the Rating Watch Negative:
Illinois Student Assistance Commission 2002 General Resolution (IL) 2002
--Class II to 'BB/LS3' from 'A/LS3'.
Illinois Student Assistance Commission 2002 General Resolution (IL) 2005
--Class IX-1 to 'BB/LS3' from 'A/LS3';
--Class IX-2 to 'BB/LS3' from 'A/LS3'.
The following applicable criteria report is available on Fitch's web site at 'www.fitchratings.com': 'Global Structured Finance Rating Criteria' dated Sept. 30, 2009 and 'Rating US Federal Family Education Loan Program Student Loan ABS Criteria' dated April 11, 2008.
Additional information is available at 'www.fitchratings.com'.
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Fitch Ratings, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com
Emily Lee, +1-212-908-0667
Aoto Kenmochi, +1-212-908-0867
