|[May 23, 2014]
Fitch Rates Nelnet Student Loan Trust 2014-4
NEW YORK --(Business Wire)--
Fitch Ratings has assigned the following ratings to Nelnet Student Loan
Trust 2014-4, student loan asset-backed notes:
--$267,500,000 class A-1 notes 'AAAsf'; Outlook Stable;
--$107,500,000 class A-2 notes 'AAAsf'; Outlook Stable;
--$9,500,000 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 19.9% of
rehabilitated (rehab) loans. The credit quality of the trust collateral
is high, in Fitch's opinion, 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
Education (ED). Fitch affirmed and assigned a Outlook Stable to the U.S.
Sovereign rating on March 24, 2014.
Sufficient Credit Enhancement: Cash flows scenarios for the class A and
B notes were satisfactory under Fitch's stresses. At closing, total
parity is expected to be 101.07% and senior parity is expected to be
103.63%. Total credit enhancement (CE) is provided by
overcollateralization (OC), excess spread and, for the class A notes,
2.47% in subordination provided by the class B notes.
Adequate Liquidity Support: Liquidity support is initially provided by a
$7,690,000 reserve account (2.00% of outstanding note balance), funded
at closing with note proceeds. On or after the July 2015 distribution
date, the specified reserve requirement is reduced to 1.25% of the
outstanding note balance with a floor of $384,500.
Target (News - Alert) Overcollateralization Level: For the pass-through structure,
excess spread must build to the greater of: 1.25% of the adjusted pool
balance or $2 million before excess cash may be released from the trust.
Acceptable Servicing Capabilities: Nelnet, Inc. will be responsible for
servicing approximately 59.4% of the NSLT 2014-4 portfolio; Pennsylvania
Higher Education Assistance Agency (PHEAA; 33.3%) and Xerox-ES (7.3%)
will service the remaining portfolio. In Fitch's opinion, all the
servicers listed are acceptable servicers of FFELP student 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 pubished stresses could result in future downgrades.
Likewise, a buildup of credit enhancement driven by positive excess
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 2014-4', dated May 14, 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 20, 2014);
--'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:
Global Structured Finance Rating Criteria
Rating U.S. Federal Family Education Loan Program Student Loan ABS
Representations, Warranties, and Enforcement Mechanisms in Global
Structured Finance Transactions
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AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
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