NEW YORK - (Business Wire) Fitch Ratings has revised the Rating Watch on the 'AA' rated Massachusetts Educational Financing Authority (MEFA) education loan revenue bonds, issue H, series 2008 (the bonds) to Negative from Evolving following the downgrade of the Issuer Financial Strength (IFS) rating of Assured Guaranty Corp. (Assured) to 'AA-' by Fitch. As a result of the downgrade of Assured, the bonds' ratings are currently based on the underlying collateral. The action is based upon Fitch's Global Structured Finance Criteria. At issuance, there were two ratings on this transaction; one based upon the insurance policy provided by Assured and one based on the underlying collateral. Fitch will continue to monitor this transaction using both approaches but will publish only one rating which will reflect the higher of the two results. Currently, the rating tied to Assured is 'AA-', while the underlying rating is now 'AA', on Rating Watch Negative.
At closing, the trust was 100% prefunded, structured with an acquisition account that contained $375.3 million to be used to acquire private student loans until Sept. 1, 2009. On Aug. 31, 2009, with written consent of Assured, the acquisition period was extended to Oct. 1, 2009. On Oct. 1, with written consent of Assured, the acquisition period for the bonds was extended to Dec. 15, 2009, subject to MEFA meeting certain conditions, and further extended to Jan. 22, 2010, subject to MEFA meeting certain additional conditions. As of the Sept. 30, 2009 reporting period, the outstanding loan balance was approximately $113 million, indicating that the majority of the funds in the acquisition account have not yet been utilized to acquire loans.
The underlying rating is on Rating Watch Negative because Fitch needs more information from the issuer to evaluate the impact of the extension of the acquisition period, which increases the negative carry in the transaction. Upon receiving the information necessary to perform a review of the underlying transaction, and determining that the bonds can withstand a 'AA' stress based on the underlying collateral, Fitch will affirm the ratings on the bonds at 'AA'. Otherwise, Fitch will downgrade the rating to 'AA-'to reflect the IFS rating of Assured.
The transaction benefits from a financial guaranty provided by Assured, and the bonds' ratings were on Rating Watch Evolving because of the Rating Watch Evolving on Assured's rating. On Oct. 12, 2009, Fitch downgraded Assured's IFS rating to 'AA-' with a Negative Outlook.
The following issues are revised to 'AA', Rating Watch Negative from 'AA', Rating Watch Evolving:
Massachusetts Educational Financing Authority Education Loan Revenue Bonds, Issue H, Series 2008:
--6.125% term bonds due Jan. 1, 2022;
--6.350% term bonds due Jan. 1, 2030.
Applicable criteria available on Fitch's web site at 'www.fitchratings.com':
--'Global Structured Finance Rating Criteria' dated Sept. 30, 2009.
Additional information is available at 'www.fitchratings.com'.
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Fitch Ratings, New York
Paul Landerman, 212-908-0876
Aoto Kenmochi, 212-908-0867
Cynthia Ullrich, 212-908-1609
or
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Sandro Scenga, 212-908-0278
Email: sandro.scenga@fitchratings.com
