Fitch Affirms Nelnet Student Loan Trust 2014-4; Outlook Positive on Subs

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the Nelnet Student Loan Trust 2014-4 senior notes at 'AAAsf' and the subordinate notes at 'A+sf'. The Rating Outlook remains Stable for the senior notes and is revised to Positive from Stable for the subordinate notes. The Outlook revision is driven by the trust nearing its target level of credit enhancement, as well as amortization of the bonds.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is composed 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 rates the U.S. sovereign government '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 March 2015, total parity is 101.14% (1.13% CE) and senior parity is 103.91% (3.77% CE). The trust will release cash once it reaches and maintains the specified overcollateralization amount equal to the greater of 1.25% 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) 2.00% of the outstanding bond balance before July 2015 (steps down to 1.25% of the outstanding bond balance after July 2015) and $384,500, currently equal to $7,203,376.16.

Acceptable Servicing Capabilities: Day-to-day servicing is provided by Nelnet, Pennsylvania Higher Education Assistance Agency (PHEAA) and Xerox Education Services. 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 buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Fitch has affirmed the following ratings:

-- Class A-1 at 'AAAsf'; Outlook Stable;

-- Class A-2 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 and Related Research:

--'Global Structured Finance Rating Criteria,' (March 31, 2015);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (June 23, 2014);

--'Nelnet Student Loan Trust 2014-4 - Appendix' (May 14, 2014)

--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (Mar 26, 2015).

Applicable Criteria and Related Research:

Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactionshttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863817

Nelnet Student Loan Trust 2014-4 -- Appendixhttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748519

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteriahttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530

Global Structured Finance Rating Criteriahttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

Additional Disclosure

Solicitation Statushttp://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984317

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.

Fitch Ratings
Primary Analyst
Eric Orenstein, +1-212-908-0245
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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