NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the senior notes issued from Nelnet Student Loan Trust 2013-1 (Nelnet 2013-1) and upgrades the SLM 2013-1 subordinate notes. The Rating Outlook on all outstanding notes remains Stable. The upgrade is driven by stable collateral performance, hence better coverage for the subordinate notes.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% of Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high, in Fitch's opinion. This is based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch currently rates the U.S. sovereign rating at 'AAA', Outlook Stable.
Sufficient Credit Enhancement: Credit Enhancement (CE) is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of the November 2014 distribution report, total parity is 102.04% and senior parity is 104.93%. Currently, cash is being released as the trust has reached the target OC release level of the greater of 2% of the adjusted pool balance and $2,000,000.
Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.50% of the pool balance and $437,500.
Acceptable Servicing Capabilities: National Education Loan Network, Inc. is the master servicer. Xerox Education Services, Tru Student, Inc., Great Lake Educational Loan Services, Inc. and Pennsylvania Higher Education Assistance Agency are the sub-servicers of this trust. In Fitch's opinion, all the servicers are acceptable servicers of FFELP student loans.
RATING SENSITIVITIES
Since 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 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.
Fitch has taken the following rating actions:
Nelnet Student Loan Trust 2013-1:
--Class A notes affirmed at 'AAAsf'; Outlook Stable;
--Class B note upgraded to 'AAsf' from 'A+sf'; Outlook Stable.
A comparison of the transaction's representations, warranties, and enforcement mechanisms (RW&Es) to those of typical RW&Es for FFELP asset-backed securities is available in the presale appendix, which along with Fitch's special report on 'Representations, Warranties, and Enforcement Mechanisms on Global Structured Finance Transactions' may be accessed via the links below.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (June 23, 2014);
--'Nelnet Student Loan Trust 2013-1 - Appendix' (Jul 18, 2014);
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' (Oct. 31, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Rating U.S. Federal Family Education Loan Program Student Loan ABS
Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530
Nelnet Student Loan Trust 2013-1 -- Appendix
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752374
Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=799248
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=944255
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