DBRS Upgrades and Confirms Existing Ratings and Assigns New Ratings to Towd Point Asset Trust 2018-SL1

On September 16, 2019, DBRS, Inc. (DBRS) amended this press release to reflect the solicited status on certain ratings listed below, resulting from procedural enhancements related to the analytical integration of Morningstar Credit Ratings, LLC (MCR) and DBRS.

DBRS upgraded the Class B Notes and Class AB Notes and confirmed the AAA (sf) ratings on the Class A Notes issued by Towd Point Asset Trust 2018-SL1 (TPAT 2018-SL1) as follows:

-- $204,664,407 Class A Notes confirmed at AAA (sf)
-- $55,041,000 Class B Notes upgraded to A (high) (sf) from A (sf)
-- $259,705,407 Class AB Notes upgraded to A (high) (sf) from A (sf)

DBRS also assigned ratings to the following classes of notes issued by TPAT 2018-SL1:

-- $13,454,000 Class C Notes at BBB (high) (sf)
-- $18,894,000 Class D-1 Notes at BBB (low) (sf)
-- $18,889,000 Class D-2 Notes at BB (low) (sf)
-- $273,159,407 Class AC Notes at BBB (high) (sf)

The collateral backing each class of Notes consists of a pool of seasoned private student loans that were originally owned by Bank of America N.A. (rated AA (low) with a Stable trend by DBRS) and sold to an affiliate of FirstKey Mortgage, LLC (FirstKey) in December 2017. The student loans were made in affiliation with other originators or student loan companies, with the majority of the loans originated under a program agreement with The First Marblehead Corporation (now known as Cognition Financial Corporation). The student loans are seasoned with the majority of initial disbursements occurring from 2001 to 2009.

The rating actions are based on DBRS’s review of the following analytical considerations:

-- The transaction’s form and sufficiency of available credit enhancement.
-- Note subordination, a reserve account and excess spread create credit enhancement levels that are commensurate with the achieved ratings.
-- Transaction cash flows are sufficient to repay investors under all stress scenarios in accordance with the terms of the TPAT 2018-SL1 transaction documents.
-- Consistent with the seasoning of the TPAT 2018-SL1 transaction, DBRS applied one additional year of seasoning credit in its default analysis, resulting in a revised expected default of 13.27%. The original DBRS-expected default for the TPAT 2018-SL1 was 15.74%.
-- Break-even cash flow stresses were performed that maximized cumulative defaults until the first dollar of note default while keeping all other assumptions the same.
-- Based on the most constraining cash flow scenario, the TPAT 2018-SL1 transaction is able to withstand cumulative defaults by rating level of approximately 52.05% at the AAA (sf) rating, 34.79% at A (high) (sf), 30.28% at BBB (high) (sf), 23.09% at BBB (low) (sf) and 18.67% at BB (low) (sf). This represents a multiple of approximately 3.92 times (x) for AAA (sf), 2.62x for A (high) (sf), 2.28x for BBB (high) (sf), 1.74x for BBB (low) (sf) and 1.41% for BB (low) (sf) of the DBRS base case cumulative default rate expectation for the TPAT 2018-SL1 pool.
-- The quality and credit characteristics of the student loan borrowers.
-- The sequential pay cash flow structure and the ability of the transaction to pay timely interest and ultimate principal on the Notes on or before the related final maturity date under all stressed cash flow scenarios.
-- The ability of the transaction to pay all interest shortfalls to the Class B Notes in all cash flow stress scenarios.
-- The ability of the servicer to perform collections on the collateral pool and other activities set forth in the transaction legal documents.
-- The legal structure and legal opinions that address the true sale of the student loans, the non-consolidation of the trust, that the trust has a valid first-priority security interest in the assets and the consistency with the DBRS “Legal Criteria for U.S. Structured Finance.”

The rating actions taken on TPAT 2018-SL1 transaction were taken in relation to the future combination of MCR and DBRS into one single U.S. registration. For more information related to the analytical integration of MCR and DBRS, along with other rating actions taken, please see the following press releases:

<a href="https://www.dbrs.com/research/349502/" target="_blank">"DBRS and Morningstar Credit Ratings Confirm U.S. ABS Asset Class Coverage"</a>

<a href="https://ratingagency.morningstar.com/mcr/" target="_blank">"Morningstar Credit Ratings Places Ratings on Towd Point Asset Trust 2018-SL1 (TPAT 2018-SL1) Under Review"</a>

<a href="https://ratingagency.morningstar.com/mcr/" target="_blank">"Morningstar Credit Ratings Places Ratings on HERO Funding 2017-1, HERO Funding 2017-2, and HERO Funding 2017-3 Under Review"</a>

Notes:
The principal methodologies are Rating U.S. Private Student Loan Securitizations and the DBRS Master U.S. ABS Surveillance Methodology, which can be found on dbrs.com under Methodologies & Criteria.

For the Class A Notes, the Class B Notes, the Class AB Notes, the Class C Notes, the Class D-1 Notes, the Class D-2 Notes and the Class AC Notes, the rated entity or its related entities did not participate in the rating process for the rating actions. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with these rating actions.

Pursuant to procedural enhancements related to the analytical integration of MCR and DBRS, the Class C Notes, the Class D-1 Notes, the Class D-2 Notes and the Class AC Notes are considered solicited credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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