Fitch Affirms Nelnet 2014-5; Outlook Revised to Positive on Subs

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the Nelnet Student Loan Trust 2014-5 senior notes at 'AAAsf' and the subordinate notes at 'A+sf'. The Rating Outlook remains Stable for the senior notes and has been revised to Positive from Stable for the subordinate notes. The Outlook revision is driven by the trust reaching its target level of credit enhancement, as well as amortization of the bonds. A full list of rating actions follows at the end of this ratings action commentary.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised of 100% 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. Fitch currently rates the U.S. sovereign rating at 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread, and for the senior notes, subordination of the class B notes. As of April 2015, total parity is 101.88% (1.85% CE) and senior parity is 104.92% (4.69% CE). The trust will continue to release cash given it maintains the Specified Overcollateralization Amount equal to the greater of 1.85% of the adjusted pool balance and $2,000,000.

Adequate Liquidity Support: Liquidity support is provided by a reserve account sized at the greater of (i) 1.05% of the outstanding bond balance before May 2019 (steps down to 0.25% of the outstanding bond balance after May 2019) and $603,000, currently equal to $5,868,254.63.

Acceptable Servicing Capabilities: Day to day servicing is provided by Nelnet, Great Lakes Education Loan Services, Inc., and Xerox-ES. In Fitch's opinion, all servicers are 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 build-up of credit enhancement 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

Fitch has affirmed the following ratings:

Nelnet Student Loan Trust 2014-5

--Class A at 'AAAsf'; Outlook Stable;

--Class B at 'A+sf'; Outlook revised to Positive from Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 31 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

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

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985836

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 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/20150603006587/en/

Fitch Ratings
Primary Analyst
Paul Jiang
Associate Director
+1 212-908-9120
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1 212-908-9171
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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