Just as one segment of the student loan ABS sector seemed to get a lifeline from federal authorities, the private side of the market took another hit. Last week, The Education Resources Institute. (TERI), filed for Chapter 11 bankruptcy after a downgrade from Moody's Investors Service tripped a trigger on a loan contract that resulted in the company having to post cash to cover its student loan guarantees.

The initial downgrade, to B2' from Baa3', happened on March 26, after Moody's expressed concerns regarding TERI's asset quality, liquidity position and adequacy of capital reserves. Making matters worse, TERI's subsequent Chapter 11 filing resulted in two downgrades. Moody's and Fitch Ratings, dropped TERI's rating down to Ca' and C', respectively.

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