Fitch Affirms 8 Classes from Arizona Higher Education Loan Authority 2005 Indenture

2008-10-30 00:28:03 -

- Fitch Ratings has affirmed 8 classes of education loan revenue bonds issued by Arizona Higher Education Loan Authority (AHELA) 2005 Indenture. The indenture was placed 'Under Analysis' through the monthly SMARTView process due to variance in performance.

Overall, collateral performance for the master trust has been consistent with expectations from a net default and delinquency perspective. Parity ratios, or the ratio of assets to liabilities, have decreased primarily due to auction failures causing bonds to pay interest at the Maximum Rate. However, based on provisions in the trust's documents, the bonds have maximum auction rate definitions based on the 91-day Treasury Bill rate plus a spread. This limits the amount of interest the trust can pay. The total parity ratio for the trust as of Aug. 31, 2008 was 97.56%.

AHELA has also extended the acquisition period for the indenture to Dec. 31, 2008 from Oct. 1. 2008. Credit enhancement consists of excess spread, and a debt service reserve fund. Additionally, the class A notes benefit from subordination provided by the lower priority notes.

AHELA is the master servicer for the student loan portfolio and subservicers are Great Lakes Educational Loan Services, Inc. (GLELSI) and ACS Education Services, Inc. (ACS); however, AHELA may also contract with additional subservicers Student Assistance Foundation of Montana (SAFM) and CFS-SunTech Servicing LLC (CFS) to service the portfolio. GLELSI and ACS carry a Fitch Seller/Servicer rating of Proficient Plus. Neither SAFM nor CFS carry a Fitch Seller/Servicer Rating.

The debt in the trust consists of tax-exempt auction-rate bonds.

The collateral supporting the bonds consists of federally guaranteed loans originated under the FFELP (Federal Family Education Loan Program). FFELP loans are guaranteed by an eligible guarantor to at least 97% of principal and accrued interest, depending on loan origination date.

The ratings affirmed are as follows:

Arizona Higher Education Loan Authority (2005):

--Senior Series 2005 A-1 'AAA';

--Senior Series 2005 A-2 'AAA';

--Subordinate Series 2005B 'A';

--Senior Series 2006 A-1 'AAA';

--Senior Series 2006 A-2 'AAA';

--Subordinate Series 2006B 'A';

--Senior Series 2007 A-1 'AAA';

--Subordinate Series 2007B 'A'.

SMARTView, a recent addition to Fitch's Structured Finance Surveillance, Metrics, Analytics, Research, and Tools (SMART) products, monitors collateral performance in structured finance bonds providing investors greater insight to Fitch's internal analytic screening process and furthers transparency by publicly identifying the deals that Fitch has identified as requiring an immediate review.

As Fitch receives monthly information on structured finance transactions from trustees and servicers, Fitch analysts run the data through various internal algorithms that identify classes of a transaction as possible candidates for upgrade or downgrade. Fitch's analysts scrutinize the output to decide which deals need a formal review, which are noted as 'under analysis', and those deals which can be given a SMARTView date.

SMARTView is available on the Fitch Ratings web site at www.fitchratings.com, along with the report titled 'SMARTView, Fitch U.S. Structured Finance Monthly Public Reviews'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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 Ratings, New York
Nicole Edwards, 212-908-9114
Stefanie Leung, 212-908-0826
or
Media Relations:
Sandro Scenga, 212-908-0278
Email: sandro.scenga@fitchratings.com