Fitch Takes Various Rating Actions on Nelnet Student Loan Trust Series 2012-4; Outlook Stable
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% Federal Family Education Loan Program (FFELP) loans, of which 21% are rehabilitated 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 at least 97% reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED). Fitch currently rates the U.S. 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement: Credit enhancement (CE) is provided by overcollateralization (OC) and excess spread. Class A will have subordination provided by class B. Total parity remains at 101.21%, and senior parity increased to 104.07%. Excess cash may be released once the OC builds to the greater of 1.20% of the adjusted pool balance and $2 million. The trust is current releasing since the specified OC amount has been satisfied.
Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund sized at the greater of 0.25% of the pool balance and $937,500. The current debt service reserve balance is $1,612,340.25.
Acceptable Servicing Capabilities: Nelnet, Inc. and Edfinancial are responsible for the day-to-day servicing of the loans in the trust. In Fitch's opinion, they are acceptable servicers 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.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has taken the following rating actions:
Nelnet Student Loan Trust Series 2012-4:
--Class A affirmed at 'AAAsf'; Outlook Stable;
--Class B upgraded to 'A+sf' from 'Asf'; Outlook Stable.
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