Approximately $76 million of asset-backed securities affected.
New York, August 28, 2012 -- Moody's Investors Service downgraded two subordinate classes of
notes issued by Nelnet Student Loan Trust 2008-1 and Nelnet Student
Loan Trust 2008-4. The downgrades conclude Moody's
review of the notes initiated in April 2012 following the implementation
of "Moody's Approach to Rating Securities Backed by FFELP Student Loans"
methodology. The underlying collateral consists of a pool of Federal
Family Education Loan Program (FFELP) student loans that are guaranteed
by the Department of Education for a minimum of 97% of defaulted
principal and accrued interest.
RATINGS RATIONALE
The ratings were downgraded as a result of the increased expected defaults
we observed in the FFELP loan pools during the recent years. Our
updated cash flow assumptions used in rating FFELP securitizations reflect
this trend. The collateral loan pools in these transactions consist
primarily of unseasoned Stafford and Plus loans. Although the total
parity, i.e. the ratio of total assets to total liabilities,
for both transactions was at the targeted release level as of the latest
reporting date, the amount of available credit support is not sufficient
to offset the higher net losses on the underlying collateral. Our
cash flow analysis indicates that both transactions are in the negative
carry position in the cash flow scenarios we use in rating highly rated
tranches in FFELP securitizations.
The principal methodology used in these ratings was "Moody's Approach
to Rating Securities Backed by FFELP Student Loans", published in
April , 2012. Please see the Credit Policy page on www.moodys.comfor
a copy of this methodology.
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. From
time to time, Moody's may, if warranted, change these
expectations. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker than
Moody's had anticipated when the related securities ratings were issued.
Even so, a deviation from the expected range will not necessarily
result in a rating action nor does performance within expectations preclude
such actions. The decision to take (or not take) a rating action
is dependent on an assessment of a range of factors including, but
not exclusively, the performance metrics.
The ratings on the subordinate bonds would be upgraded if spread between
LIBOR index on the liability side and the one-month LIBOR index
on the asset side is 10 bps lower, or downgraded if the spread is
10 bps higher.
To assess rating implications of the higher expected losses, each
individual transaction was run through a variety of stress scenarios using
the Structured Finance Workstation® (SFW), a cash flow model
developed by Moody's Wall Street Analytics.
The complete rating actions are as follows:
Issuer: Nelnet Student Loan Trust 2008-1
Cl. B, Downgraded to Baa3 (sf); previously on Apr 2.,
2012 A2 (sf) Placed Under Review for Possible Downgrade
Issuer: Nelnet Student Loan Trust 2008-4
Cl. B, Downgraded to Ba1 (sf); previously on Apr 2.,
2012 A3 (sf) Placed Under Review for Possible Downgrade
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information and confidential and proprietary Moody's Analytics
information.
Moody's did not receive or take into account a third party assessment
on the due diligence performed regarding the underlying assets or financial
instruments related to the monitoring of these transactions in the past
six months.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
JingJing Dang
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Irina Faynzilberg
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades subordinate classes of notes issued by two Nelnet Student Loan Trusts