NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms at 'AAAsf' the senior notes issued by Nelnet Student Loan Trust 2004-4. In addition, Fitch upgrades the subordinate note to 'AAsf' from 'AA-sf'. The Stable Outlook has been maintained for both classes.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% (99.77% Non-Rehab; 0.23% Rehab) of Federal Family Education Loan Program (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. On March 24, 2014, Fitch affirmed the U.S. sovereign rating at 'AAA' and assigned a Stable Outlook.
Sufficient Credit Enhancement: While both the senior and subordinate notes will benefit from excess spread, the senior notes also benefit from subordination provided by the class B note. Fitch gives credit to the reserve fund, which is excluded from the adjusted pool balance once the pool factor is at 40%. The current pool factor is at 21.03%. As of December 2013, Fitch's calculated total parity is 101.23% (1.22% CE) and Fitch's calculated senior parity is 110.95% (9.87% CE). The trust is currently releasing cash as long as the $5,144,248 over-collateralization is maintained. Fitch expects the parity to build up gradually.
Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.25% of the pool balance, and $2,991,407.
Acceptable Servicing Capabilities: National Education Loan Network is the master servicer and Nelnet Inc. is the subservicer. Fitch believes both National Education Loan Network and Nelnet Inc. to be 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.
Fitch takes the following rating actions as indicated:
Nelnet Student Loan Trust 2004-4:
--Class A-5 affirmed at 'AAAsf'; Outlook Stable;
--Class B upgraded to 'AAsf' from 'AA-sf'; Outlook Stable.
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).
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 - Effective Apr. 7, 2011 to Apr. 3, 2012
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=616766
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826129
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