Approximately $3.4 billion of asset-backed securities affected.
New York, September 12, 2016 -- Moody's Investors Service, ("Moody's") has
confirmed the ratings of five classes of notes, upgraded the ratings
of six classes of notes, and downgraded the ratings of nine classes
of notes issued in 12 student loan securitizations sponsored by Nelnet,
Inc. The securitizations are backed by student loans originated
under the Federal Family Education Loan Program (FFELP) that are guaranteed
by US government for a minimum of 97% of defaulted principal and
accrued interest.
Complete rating actions are as follows:
Issuer: Nelnet Student Loan Trust 2004-3
Cl. B, Upgraded to Aaa (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review for Possible Upgrade
Issuer: Nelnet Student Loan Trust 2004-4
Cl. B, Upgraded to Aaa (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review for Possible Upgrade
Issuer: Nelnet Student Loan Trust 2005-1
Cl. A-5, Confirmed at Aaa (sf); previously on
Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Upgraded to Aaa (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review for Possible Upgrade
Issuer: Nelnet Student Loan Trust 2005-2
Cl. B, Upgraded to Aaa (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review for Possible Upgrade
Issuer: Nelnet Student Loan Trust 2005-3
Cl. B, Upgraded to Aaa (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review for Possible Upgrade
Issuer: Nelnet Student Loan Trust 2006-1
Cl. A-6, Downgraded to A2 (sf); previously on
Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Nelnet Student Loan Trust 2006-3
Cl. A-4, Confirmed at Aaa (sf); previously on
Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-5, Confirmed at Aaa (sf); previously on
Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-6, Confirmed at Aaa (sf); previously on
Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Upgraded to Aaa (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review Direction Uncertain
Issuer: Nelnet Student Loan Trust 2008-2
Cl. A-4, Downgraded to Aa1 (sf); previously on
Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade
Issuer: Nelnet Student Loan Trust 2008-3
Cl. A-4, Downgraded to Baa3 (sf); previously
on Jun 22, 2015 Aaa (sf) Placed Under Review for Possible Downgrade
Issuer: Nelnet Student Loan Trust 2008-4
Cl. A-4, Downgraded to Ba1 (sf); previously on
Jun 22, 2015 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Confirmed at Ba2 (sf); previously on Jun 14,
2016 Ba2 (sf) Placed Under Review Direction Uncertain
Issuer: Nelnet Student Loan Trust 2012-3
Class A Notes, Downgraded to Aa1 (sf); previously on Jun 14,
2016 Aaa (sf) Placed Under Review for Possible Downgrade
Class B Notes, Downgraded to A1 (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Nelnet Student Loan Trust 2014-2
Class A-3 Notes, Downgraded to A1 (sf); previously on
Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade
Class B Notes, Downgraded to A1 (sf); previously on Jun 14,
2016 Aa1 (sf) Placed Under Review for Possible Downgrade
RATINGS RATIONALE
The downgrades are a result of Moody's analysis indicating that
the tranches will not pay off by final maturity dates in either some or
all of Moody's 28 cash flow scenarios, thus causing the tranches
to incur expected losses that are higher than the expected loss benchmarks
set in Moody's idealized loss tables for the current ratings. The
low payment rates on the underlying securitized pools of FFELP student
loans are driven primarily by persistently high levels of loans to borrowers
in non-standard payment plans, including deferment,
forbearance and Income-Based Repayment (IBR), as well as
by the relatively low rates of voluntary prepayments.
The upgrades and confirmations are primarily a result of Moody's analysis
indicating that the tranches are likely to either successfully pay off
by maturity dates, or that their expected losses across Moody's
cash flow scenarios are respectively either lower or consistent with the
expected loss benchmarks in Moody's idealized loss tables for the current
tranche ratings.
In these rating actions Moody's also considered transaction structure
features that might protect the deals from default as a result of the
tranches not fully amortizing by their maturity dates. One of such
features includes Nelnet's ability to optionally call the notes
on the earlier of a specified date or the 10% pool factor (i.e.,
when the balance of the collateral pool declines to 10% of the
initial pool balance). Nelnet's consistent exercise of this
option in the past demonstrates its willingness and ability to support
the transactions and making sure the tranches do not default at maturity.
Another feature includes the requirement that the Indenture trustee initiates
a sale of the underlying student loan pools if Nelnet does not notify
it of its intent to call the bonds. The sale of the student loan
pools will take place only if the proceeds will be sufficient to pay off
all outstanding notes.
The principal methodology used in these ratings was "Moody's Approach
to Rating Securities Backed by FFELP Student Loans" published in August
2016. Please see the Ratings Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of ratings:
Up
Moody's could upgrade the ratings if the paydown speed of the loan pool
increases as a result of declining borrower usage of deferment,
forbearance and IBR, increasing voluntary prepayment rates,
or prepayments with proceeds from sponsor repurchases of student loan
collateral. Moody's could also upgrade the rating owing to a build-up
in credit enhancement.
Down
Moody's could downgrade the ratings if the paydown speed of the loan pool
declines as a result of low voluntary prepayments, and high deferment,
forbearance and IBR rates, which would threaten full repayment of
the classes by their final maturity dates. In addition, because
the US Department of Education guarantees at least 97% of principal
and accrued interest on defaulted loans, Moody's could downgrade
the ratings of the notes if it were to downgrade the rating on the United
States government.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
In rating this transaction, Moody's used a cash flow model
to model cash flow stress scenarios to determine the extent to which investors
would receive timely payments of interest and principal in the stress
scenarios, given the transaction structure and collateral composition.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Vincent Raia
Associate 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 - Sr Credit Officer/Manager
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