Fitch Affirms Nelnet Student Loan Trust 2014-1; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has taken the following rating actions on Nelnet Student Loan Trust 2014-1:

--Class A affirmed at 'AAAsf'; removed from Rating Watch Negative, assigned Outlook Stable;

--Class B affirmed at 'A+sf'; Outlook Stable.

KEY RATING DRIVERS

The Class A note is affirmed at 'AAAsf' due to its ability to pass 'AAA' credit stresses, as detailed in the exposure draft published by Fitch on Nov. 18, 2015, based on updated trust performance data as of the February 2016 collection period.

High Collateral Quality: The trust's collateral consists of 100% Federal Family Education Loan Program (FFELP) loans, including approximately 24.31% of rehabilitated loans. The credit quality of the trust 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 Stable Outlook is consistent with Fitch's affirmation of the U.S. sovereign rating at 'AAA', Outlook Stable.

Sufficient Credit Enhancement (CE): Transaction CE is provided by overcollateralization (OC) and excess spread. In addition, the class A notes benefit from subordination from the class B notes. As of the February 2016 collection period, senior and total parity are at 105.57% and 101.26%, respectively. The trust has been releasing cash, as the specified OC amount that requires the greater of 1.25% of the adjusted pool balance and $2,000,000 has been met.

Adequate Liquidity Support: Liquidity support is provided by a $835,911 reserve account as of the February 2016 collection period. The reserve account is sized at the greater of 0.25% of outstanding notes and $458,500 floor.

Acceptable Servicing Capabilities: National Education Loan Network, Inc. services approximately 93% of the 2014-1 portfolio. Great Lakes Education Loan Services Inc. (GLESI) services the remaining portion of the portfolio. In Fitch's opinion, both are acceptable servicers 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 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 student 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

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

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 Criteria for Structured Finance Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

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

Related Research

Nelnet Student Loan Trust 2014-1 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=731195

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1002098

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002098

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/20160406006562/en/

Fitch Ratings
Primary Analyst:
Victoria Ohorodnyk, +1-212-908-0866
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Kevin Corrigan, +1-212-908-0156
Senior Director
or
Media Relations:
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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