NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings to the Nelnet Student Loan Trust 2014-2, student loan asset-backed notes as follows:
--$191,000,000 class A-1 notes 'AAAsf'; Rating Watch Negative;
--$222,000,000 class A-2 notes 'AAAsf'; Rating Watch Negative;
--$84,000,000 class A-3 notes 'AAAsf'; Rating Watch Negative;
--$12,000,000 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% 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 Education (ED).
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 100.89% and 103.33%, respectively. Total credit enhancement (CE) is provided by overcollateralization (OC) and excess spread, and for class A notes, 2.34% 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 is initially provided by a $2.545 million (0.50% of outstanding note balance), funded at closing with note proceeds. On or after the August 2015 distribution date, the specified reserve requirement is reduced to 0.25% of the outstanding note balance with a floor of $509,000.
Acceptable Servicing Capabilities: Nelnet will be responsible for servicing approximately 64% of the 2014-2 portfolio. PHEAA (15%), ACS (13%) and Great Lakes Educational Loan Services Inc. (8%) will service the remaining portfolio. In Fitch's opinion, all the servicers listed are acceptable servicers of FFELP student loans.
RATING SENSITIVITIES
Since FFELP student loan ABS 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 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 2014-2', dated March 3, 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:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676496
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823492
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