Fitch Takes Various Actions on Nelnet Student Loan Trusts

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed three tranches of notes for Nelnet Student Loan Trust 2005-2. Fitch has also affirmed two tranches of notes for Nelnet Student Loan Trust 2005-3, and maintains the Rating Watch Negative on the A-5 note. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Maturity Risk: The Rating Watch Negative on the Nelnet 2005-3 A-5 note is based on the heightened risk of the note missing its legal final maturity of Dec. 24, 2035, which would result in an event of default. In an event of such technical default, Fitch would expect ultimate repayment of full principal and interest after the legal final. The magnitude of the rating action could vary depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors. Absent any issuer actions, structural or other mitigants, it is possible that 'AAA' ratings could be downgraded one to two rating categories. Fitch expects to complete its review and resolve the Rating Watch status over the next three to six months.

Collateral Quality: Nelnet 2005-2 and Nelnet 2005-3 are backed by 100% Federal Family Education Loan Program (FFELP) loans, with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest for the FFELP loans. The U.S. is currently rated 'AAA'; Outlook Stable.

Credit Enhancement: Credit Enhancement is provided by excess spread, and for the class A notes, subordination of the class B notes. As of November 2015, senior and total parity ratios including the reserve fund for Nelnet 2005-2 are 107.81% and 100.80%, respectively. As of November 2015, senior and total parity ratios for Nelnet 2005-3 are 107.88% and 100.90%, respectively. The trusts will continue to release cash as long as the target total parity ratios of 100%, not including the reserve fund, are maintained.

Liquidity support: Liquidity support for the Nelnet 2005-2 and Nelnet 2005-3 notes is provided by reserve accounts, sized at 0.25% of the adjusted pool balance, with floors of $2,976,292 for Nelnet 2005-2 and $1,988,700 for Nelnet 2005-3. The reserve accounts for both trusts are currently equal to their respective floors.

Servicing Capabilities: Nelnet services 100% of the loans. In Fitch's opinion, Nelnet is an acceptable servicer 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 these transactions under both the existing and proposed criteria, which has resulted in maintaining the Nelnet 2005-3 class A-5 note on Rating Watch Negative.

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.

Fitch takes the following actions:

Nelnet Student Loan Trust 2005-2:

--Class A-4 affirmed at 'AAAsf'; Outlook Stable;

--Class A-5 affirmed at 'AAAsf'; Outlook Stable;

--Class B affirmed at 'AA-sf'; Outlook Stable.

Nelnet Student Loan Trust 2005-3:

--Class A-4 affirmed at 'AAAsf'; Outlook Stable;

--Class A-5 'AAAsf'; Rating Watch Negative maintained;

--Class B affirmed at 'AA-sf'; Outlook Stable.

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 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

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997322

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997322

Endorsement Policyhttps://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/20151223005609/en/

Fitch Ratings
Primary Analyst:
Harry Kohl, +1-212-908-0837
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Kevin Corrigan, +1-212-908-9156
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• QWebDevelopments CEO Anthony Q Purchases Iconic GT at 29, Bringing His Success Full throttle
• Beno Opens Luxury Waterfront Guest Lounge at Marsa Al Arab in Partnership with Jumeirah Group
• Hepsor AS to hold a webinar introducing the planned public offering of series II bonds