Press Release

Morningstar DBRS Finalizes Its Provisional Credit Ratings on ELFI Graduate Loan Program 2024-A LLC

Student Loans
June 26, 2024

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of notes (the Notes) issued by ELFI Graduate Loan Program 2024-A LLC (ELFI 2024-A):

-- $246,690,000 Class A Notes rated AAA (sf)
-- $8,550,000 Class B Notes rated AA (sf)
-- $15,110,000 Class C Notes rated BBB (sf)

CREDIT RATING RATIONALE/DESCRIPTION

The credit ratings on the Notes are based on a review by Morningstar DBRS of the following considerations:

(1) The transaction’s form and sufficiency of available credit enhancement.
-- Overcollateralization, subordination, reserve account amounts, liquidity account amounts, and excess spread (if any) create credit enhancement levels commensurate with the ratings.
-- Transaction cash flows are sufficient to repay investors under all AAA (sf), AA (sf), and BBB (sf) stress scenarios in accordance with the terms of the ELFI 2024-A transaction documents.

(2) The quality and credit characteristics of the student loan borrowers.

(3) Structural features of the transaction that require the Notes to enter into full turbo principal amortization if certain performance triggers are breached or if credit enhancement deteriorates.

(4) The experience, underwriting, and origination capabilities of SouthEast Bank.
-- Morningstar DBRS has performed an operational review of SouthEast Bank and considers the entity to be an acceptable originator.

(5) The ability of the servicers to perform collections on the collateral pool and other required activities.
-- Morningstar DBRS has performed an operational review of the Higher Education Loan Authority of the State of Missouri (MOHELA) and Pennsylvania Higher Education Assistance Agency (PHEAA) and considers the entities to be acceptable servicers.

(6) The legal structure and legal opinions that address the true sale of the student loans, the nonconsolidation of the trust, that the trust has a valid first-priority security interest in the assets, and the consistency with Morningstar DBRS’ “Legal Criteria for U.S. Structured Finance”.

(7) The transaction assumptions consider Morningstar DBRS’ baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios For Rated Sovereigns—March 2024 Update”, published on March 27, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

ELFI 2024-A utilizes a traditional pass-through structure, with credit enhancement consisting of overcollateralization, excess spread, subordination provided by the Class B Notes and Class C Notes for the benefit of the Class A Notes, subordination provided by the Class C Notes for the benefit of the Class B Notes, a reserve account for the Class A Notes, and separate liquidity accounts for the Class B Notes and Class C Notes.

Morningstar DBRS' credit ratings on the Notes referenced herein address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the principal amounts of the Class A Notes, the Class B Notes, and the Class C Notes, the interest on the Class A Notes, including any unpaid interest from the prior month, and the Class B interest distribution amount, including unpaid interest distributions from the prior month.

Morningstar DBRS' credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. The associated contractual payment obligations that are not financial obligations are interest on the unpaid Class A Note interest, interest on the unpaid Class B Note interest distribution amount, the Class B Carry-over Amount, including unpaid Class B Carry-over Amounts from the prior month, and interest on the unpaid Class B Carry-over Amounts.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings https://dbrs.morningstar.com/research/427030/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (January 23, 2024).

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

The principal methodology applicable to the credit rating is Rating U.S. Private Student Loan Securitizations (October 25, 2023; https://dbrs.morningstar.com/research/422385).

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

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

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

Rating U.S. Structured Finance Transactions (April 15, 2024)
https://dbrs.morningstar.com/research/431204/rating-us-structured-finance-transactions

Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024)
https://dbrs.morningstar.com/research/428623

Operational Risk Assessment for U.S. ABS Servicers (March 21, 2024)
https://dbrs.morningstar.com/research/430003/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (March 21, 2024)
https://dbrs.morningstar.com/research/430004/operational-risk-assessment-for-us-abs-originators

Legal Criteria for U.S. Structured Finance (April 15, 2024)
https://dbrs.morningstar.com/research/431205/legal-criteria-for-us-structured-finance

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

Ratings

  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating