DBRS Morningstar Assigns Provisional Ratings to Kentucky Higher Education Student Loan Corporation Series 2020-1

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following series of notes to be issued by Kentucky Higher Education Student Loan Corporation Series 2020-1 (KHESLC 2020-1):

-- $207,820,000 Series A-1A Notes rated AAA (sf)
-- $207,820,000 Series A-1B Notes rated AAA (sf)
-- $7,000,000 Series B Notes rated A (sf)

The provisional ratings are based on a review by DBRS Morningstar of the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19) pandemic, available in its commentary “Global Macroeconomic Scenarios: September Update,” published on September 10, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which have been regularly updated. The scenarios were last updated on September 10, 2020, and are reflected in DBRS Morningstar’s rating analysis.
-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for current ratings. The moderate scenario remains predicated on a more rapid return of confidence and a steady recovery heading into 2021.
-- The transaction’s form and sufficiency of available credit enhancement.
-- The ability of the servicer to perform collections on the collateral pool and other required activities.
-- The provisions in the transaction documents anticipate the transition to a new replacement index in the event that LIBOR is discontinued. DBRS Morningstar assumes that the anticipated replacement index (including any spread adjustment) would not be a material deviation from the framework provided under the DBRS Morningstar methodology “Interest Rate Stresses for U.S. Structured Finance Transactions.”
-- The legal structure and expected legal opinions.

The collateral securing KHESLC 2020-1 primarily consists of student loans originated pursuant to the Federal Family Education Loan Program, which are ultimately guaranteed by the U.S. Department of Education for at least 97% of defaulted principal plus accrued interest. Kentucky Higher Education Student Loan Corporation will act as servicer for 100% of the student loans. Nelnet Servicing, LLC will act as back-up servicer.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Federal Family Education Loan Program Securitizations (February 19, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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