|[February 06, 2014]
Fitch Rates Nelnet Student Loan Trust 2014-1
NEW YORK --(Business Wire)--
Fitch Ratings has assigned the following ratings to the Nelnet Student
Loan Trust 2014-1, student loan asset-backed notes as follows:
--$445,000,000 class A notes 'AAAsf'; Rating Watch Negative;
--$13,500,000 class B notes 'A+sf'; Outlook Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% Federal
Family Education Loan Program (FFELP) loans, including approximately
25.0% of rehabilitated (rehab) loans. In Fitch's opinion, the credit
quality of the trust collateral is high based on the guarantees provided
by the transaction's eligible guarantors and at least 97% reinsurance of
principal and accrued interest provided by the U.S. Department of
Rating Watch Negative: All existing and new issuances of 'AAA' rated
tranches of FFELP securitizations are on Rating Watch Negative following
the revision of the long-term foreign and local currency Issuer Default
Ratings of the U.S.
Sufficient Credit Enhancement: Cash flow scenarios for class A and B
notes were satisfactory under Fitch's stresses. At closing, total and
senior parity are expected to be 100.55% and 103.60%, respectively.
Total credit enhancement (CE) is provided by overcollateralization (OC)
and excess spread, and for class A notes, 2.94% subordination is
provided by class B notes. A target OC amount equal to the greater of
1.25% of the adjusted pool balance and $2 million must be met before
excess cash can be released from the trust.
Adequate Liquidity Support: Liquidity support for NSLT 2014-1 notes is
provided by a $2.5 million capitalized interest fund and a $1.146
million (0.25% of outstanding notes) reserve account, both of which are
funded at closing with note proceeds.
Acceptable Servicing Capabilities: Nelnet Inc. will service 92.5% of the
2014-1 portfolio, while Great Lakes Educational Loan Services Inc.
(GLELSI) will service the remaining 7.5%. Fitch considers all servicers
to be acceptable servicers of FFELP loans.
Since FFELP student loan ABS (News - Alert) rely on the U.S. government to reimburse
defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the
'AAA' U.S. sovereign rating. Aside from the U.S. sovereign rating,
defaults and basis risk account for the majority of the risk embedded in
FFELP student loan transactions. Additional defaults and basis shock
beyond Fitch's published stresses could result in future downgrades.
Likewise, a buildup of CE driven by positiveexcess spread given
favorable basis factor conditions could lead to future upgrades. For
further discussion of Fitch's sensitivity analysis, please see the
presale titled 'NSLT 2014-1', dated Jan. 28, 2014, available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS
Criteria' (May 17, 2013);
--'Representations, Warranties and Enforcement Mechanism in Global
Structure Finance Transactions' (April 17, 2012)
Applicable Criteria and Related Research:
Representations, Warranties, and Enforcement Mechanisms in Global
Structured Finance Transactions -- Amended
Rating U.S. Federal Family Education Loan Program Student Loan ABS
Criteria -- Amended
Global Structured Finance Rating Criteria
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