Holders of Academic Management Services student loan ABS were bailed out from the recent troubles surrounding the name (see ASR 7/28/03), following the closing of its acquisition by Sallie Mae last week. Sallie Mae is expected to pay down the two outstanding senior/subordinated transactions and add the loans in the pool to its own future securitizations.

As a result of the sale, UICI will realize net cash proceeds of approximately $27.8 million. Additionally, UICI also received uninsured student loan assets formerly held by AMS, totaling $44.3 million, including accrued interest. The loans being transferred to Sallie Mae are performing as normal, sources confirmed. "The trouble resulted from the trust being administered improperly, contrary to the documentation," noted Moody's Investors Service senior credit officer Sharon Asch. "The loans are fine."

The concerns were prompted by the July revelation by AMS' parent that its securitization vehicle, EFG Funding III, had experienced collateral shortfalls, and was found to have incompatible collateral in the trust. While the majority of AMS student loan ABS was safe, thanks to a full MBIA wrap, two transactions - AMS-2 2002 and AMS-3 2003 - were placed on watch for a downgrade by all three rating agencies as a cautionary measure.

Despite the announcement, Moody's was the only rating agency to remove AMS's ABS from watch and affirm its ratings, as of last Thursday. While the situation is deemed remedied, and ratings affirmation is viewed as inevitable, Fitch Ratings and Standard & Poor's are taking a wait-and-see approach.

"From a credit perspective this is a positive for AMS asset-backed bonds," said Steven Moffitt, a director in the student loan group at Fitch. "But aside from the sale closing, we don't know much more about the collateral shortfalls than we did last week," he added.

The transition is viewed as a mere formality, as Sallie Mae was the sub-servicer of the FFELP-guaranteed collateral, which makes up the entire series 2-2002 pool and part of the series 3-2003. Series 3-2003 consists of a mix of both traditional and consolidation loan product.


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