Fitch Ratings has affirmed four classes from the Federal Family Education Loan Program (FFELP) student loan revenue notes issued by Pennsylvania Higher Education Assistance Agency, series 2006-2 Trust, as follows:
--Senior class A-1 at 'AAA';
--Senior class A-2 at 'AAA';
--Senior class A-3 at 'AAA';
--Subordinate class B at 'A'.
Overall, collateral performance for the trust has been consistent with expectations from a net default and delinquency perspective. Approximately 97% of the notes have floating rates equal to three-month London Interbank Offered Rate (LIBOR) plus a spread. The remaining 3% of the notes are taxable auction rate securities which are currently earning interest at the maximum rate. The trust documents define the maximum rate as the lesser of one month LIBOR + 2.5% and highest rate the issuer may legally pay. The maximum rate definition limits the amount of interest the trust can pay on the auction rate notes.
Parity ratios, or the ratio of assets to liabilities, have increased consistently despite auction failures causing bonds to pay interest at the maximum rate. The total parity ratio for the trust as of Sept. 30, 2008 was 100.4%.
Credit enhancement consists of excess spread, overcollateralization and a reserve fund. Additionally, the class A notes benefit from subordination provided by the lower priority notes.
The collateral supporting the bonds consists of federally guaranteed loans originated under the FFELP. FFELP loans are guaranteed by an eligible guarantor to at least 97% of principal and accrued interest, depending on the loan origination date.
The student loan portfolio is serviced by American Education Services (does not carry a Fitch Seller/Servicer Rating).
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