Fitch Expects to Rate Nelnet Student Loan Trust 2015-2; Presale Issued
--\$122,500,000 class A-1 notes 'AAAsf(EXP)'; Outlook Stable;
--\$584,500,000 class A-2 notes 'AAAsf(EXP)'; Outlook Stable;
--\$15,000,000 class B notes 'Asf(EXP)'; Outlook Stable.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% Federal Family Education Loan Program (FFELP) loans including approximately 24.6% rehabilitated (rehab) loans. In Fitch Ratings' opinion, the credit quality of the trust collateral is high, based on the guarantees provided by the transaction's eligible guarantors and at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED). The U.S. is currently rated 'AAA' with a Stable Rating Outlook by Fitch.
Sufficient Credit Enhancement: Cash flow scenarios for class A and B notes were satisfactory under Fitch's respective stresses. Total credit enhancement (CE) is provided by overcollateralization (OC) and excess spread, and for the class A notes, 2.08% subordination is provided by the class B notes. At closing, total and senior parity are expected to be 101.49% and 103.65%, respectively. A target OC amount equal to the greater of 2.50% of the adjusted pool balance and \$2 million must be met before excess spread can be released from the trust.
Adequate Liquidity Support: Liquidity support is provided by an approximate \$14.44 million reserve account (2.00% of outstanding note balance), funded at closing with note proceeds. On or after the January 2017 distribution date, the specified reserve requirement will be the greater of 0.25% of the outstanding note balance and 0.10% of the initial note balance.
Acceptable Servicing Capabilities: Pennsylvania Higher Education Assistance Agency will service approximately 77% of the NSLT 2015-2 portfolio; Xerox Education Services, LLC will service 23% of the portfolio. In Fitch's opinion, all of the servicers are acceptable servicer of FFELP student loans.
RATING SENSITIVITIES
Since FFELP student loan ABS rely 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. For further discussion of Fitch's sensitivity analysis, please see the presale titled 'NSLT 2015-2', dated March. 12, 2015, available at www.fitchratings.com.
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