NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the senior notes issued by Nelnet Student Loan Trust 2012-3 at 'AAAsf' and upgrades the subordinate notes to 'AAsf' from 'Asf'. The Rating Outlook on both notes remains Stable.
KEY RATING DRIVERS
High Collateral Quality: The collateral consists of 100% of Federal Family Education Loan Program (FFELP) loans including 9.48% 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. Fitch currently rates the U.S. sovereign 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance), excess spread, and (for the senior notes) subordination of the class B notes. As of April 2014, senior parity and total parity are 104.8% (3.92% CE) and 101.1% (1.00%) respectively. The trust is releasing cash at the cash release level of the greater of 1.00% OC and $2 million.
Adequate Liquidity Support: Liquidity support is provided by a reserve account and a capitalized interest account. The reserve is sized at the greater of 0.25% of the pool balance and $424,300.
Acceptable Servicing Capabilities: National Education Loan Network, Inc. is the Master Servicer, with Nelnet, Inc. acting as subservicer. Fitch believes both National Education Loan Network, Inc. and Nelnet, Inc. to be acceptable servicers of FFELP student loans.
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 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 has taken the following rating actions:
Nelnet Student Loan Trust 2012-3
--Class A note affirmed at 'AAAsf'; Outlook Stable;
--Class B note upgraded to 'AAsf' from 'Asf'; Outlook Stable.
A comparison of the transaction's RW&Es to those of typical RW&Es for student loans is available by accessing the reports and links below:
--'Nelnet Student Loan Trust 2012-3 - Appendix', dated July 26, 2012;
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions --Amended', dated April 17, 2012.
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=748821
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=833675
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