Minnesota Office Of Higher Education (2020 Senior Series) Assigned Ratings

  • The Minnesota Office Of Higher Education's issuance is an ABS transaction backed by private fixed-rate student loans made under the Minnesota Office of Higher Education Student Educational Loan Fund Program.
  • We assigned our 'AA (sf)' ratings to the 2020 senior series bonds.
  • The ratings reflect our view of the transaction's credit support, initial parity, and payment and legal structures, among other factors.
NEW YORK (S&P Global Ratings) March 25, 2020--S&P Global Ratings today 
assigned its 'AA (sf)' ratings to the Minnesota Office Of Higher Education's 
(MOHE's) $57.690 million supplemental student loan program revenue bonds 2020 
senior series (series 2020).

The note issuance is an ABS transaction backed by private fixed-rate student 
loans made under the Minnesota Office Of Higher Education Student Educational 
Loan Fund Program.

The ratings reflect:
  • The approximately 28.7%-29.9% credit support available based on our 'AA' stressed break-even cash flow scenarios. These credit support levels provide coverage of approximately 4.3x-4.5x our base-case net loss in the 'AA' stressed break-even cash flow scenarios.
  • The transaction's approximately 132.4% initial parity (defined as a percentage of the total assets, including any funds in the reserve account divided by the total bonds).
  • The transaction's payment mechanism, which maintains the senior parity ratio to at least 132.0%, while trust assets exceed trust liabilities by a minimum of $15.0 million.
  • The fully funded debt service reserve fund, which is equal to the greater of 2.0% of the outstanding bond principal balance or 1.0% of the initial bond principal balance.
  • The credit quality of both the existing loan pool and the loans to be transferred from MOHE's Loan Capital Fund during the acquisition period, which are expected to have a composition and quality similar to that of MOHE's existing portfolio.
  • The loan eligibility criteria that MOHE will use to originate new loans under its SELF V program during the origination period ending June 30, 2021.
  • The timely interest and principal payments made under stressed cash flow and sensitivity modeling scenarios that S&P Global Ratings believes are consistent with the assigned ratings.
  • Our expectation that under a moderate ('BBB') stress scenario, the ratings on the series 2020 bonds would remain within one category of our 'AA (sf)' rating in the first year. These potential rating movements are consistent with our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010).
  • The loans' fixed interest rates, which should provide positive excess spread, given the expected interest rate on the bonds and transaction fees.
  • The transaction's payment and legal structures.
S&P Global Ratings acknowledges a high degree of uncertainty about the rate of 
spread and peak of the coronavirus outbreak. Some government authorities 
estimate the pandemic will peak around midyear, and we are using this 
assumption in assessing the economic and credit implications. In our view, the 
measures adopted to contain COVID-19 have pushed the global economy into 
recession (see our macroeconomic and credit updates here: 
www.spglobal.com/ratings). As the situation evolves, we will update our 
assumptions and estimates accordingly.

In addition to cash flow runs incorporating stressed levels of defaults, 
forbearance, and deferral--all of which paid timely interest and principal 
payments made by the legal final maturity date--we conducted further liquidity 
analysis to assess the effects of a temporary decrease in loan principal and 
interest payments over the next several months as a result of COVID-19 
pandemic effects. We are monitoring government proposals being discussed, 
intended to provide relief to student loan obligors, which would either reduce 
or temporarily delay obligors' student loan payments. We will continue to 
monitor these proposals as they develop, and assess their impact on the 
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