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Fitch Takes Various Actions on Nelnet 2015-1Fitch Ratings has taken the following rating actions on Nelnet Student Loan Trust 2015-1: --Class A 'AAAsf'; Rating Watch Negative maintained; --Class B affirmed at 'A+sf'; Outlook Stable. KEY RATING DRIVERS Maturity Risk: The Rating Watch Negative action is based on the heightened risk of the Nelnet 2015-1 class A notes missing their legal final maturity date of April 25, 2041, which would result in an event of default. In an event of such technical default, Fitch would expect ultimate repayment of full principal and interest after the legal final. Fitch expects to resolve the Rating Watch Negative status once its revised FFELP criteria report is published. The magnitude of any potential rating action could vary depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors. High Collateral Quality: The trust collateral consists of 100% Federal Family Education Loan Program (FFELP) loans, including 19.3% of rehabilitated FFELP 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 reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The current U.S. sovereign rating is at 'AAA' with a Stable Outlook. Sufficient Credit Enhancement (CE): While both the senior and subordinate notes will benefit from overcollateralization (OC) and future excess spread, the senior notes also benefit from subordination provided by the class B note. As of December 2015, total OC is 1.25%, and OC available to the senior notes is 3.76%. Cash will continue to be released from the trust given that the specified OC amount (the greater of 1.25% of the adjusted pool balance or $2.00 million) is maintained. Adequate Liquidity Support: Liquidity support is provided by a reserve account sized at the greater of (i) 1.15% of the outstanding bond balance before February 2016 (steps down to 0.25% of the outstanding bond balance after February 2016) and $566,346, currently equal to $6,005,251. Acceptable Servicing Capabilities: Nelnet, Inc., as servicer, will be responsible for servicing the portfolio. Fitch has reviewed the servicing operations of Nelnet and believes it to be acceptable servicer of FFELP student loans. On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS (News - Alert) Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria. RATING SENSITIVITIES Since the FFELP student loan ABS relies 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, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP studet loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades. DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action. Additional information is available at www.fitchratings.com. Applicable Criteria Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 04 Dec 2015) https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874971 Global Structured Finance Rating Criteria (pub. 06 Jul 2015) https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952 Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014) https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=999402 Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999402 Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. View source version on businesswire.com: http://www.businesswire.com/news/home/20160211006293/en/ |
