Fitch Upgrades KeyCorp Student Loan Trust 2006-A (Group II) Sr Notes; Affirms Sub & Jr Sub

NEW YORK--()--Fitch Ratings has upgraded the senior notes of KeyCorp Student Loan Trust 2006-A (Group II) to 'AAsf' from 'Asf', and affirmed the subordinate and junior subordinate notes at 'B+sf', and 'CCsf'. The Rating Outlook for the senior and subordinate notes remains Stable. The Recovery Estimate for the junior subordinate note remains at 0%.

The upgrade of the senior notes is due to increased senior parity and loss coverage, as the trust continues to pay note principal sequentially to the senior notes before the subordinate and junior subordinate notes.

A full list of rating actions follows at the end of this ratings action commentary.

KEY RATING DRIVERS

Collateral Quality: The trust is collateralized by approximately $293 million of private student loans originated by KeyBank under the Key Alternative Loan program, Campus Door program, Private Graduate program, and TERI program. The projected remaining defaults are expected to range between 17% - 19% of the current pool balance. A recovery rate of 15% was applied based on historical data.

Credit Enhancement (CE): CE is provided by overcollateralization, excess spread and subordination for the class A and B notes. Additionally, the group can receive excess cash from the bifurcated trust, KSLT 2006-A Group I Federal loan pool. As of the May 2015 servicer report, the parity ratios have increased since the last review from 161.74% to 183.68% for the class A notes, from 110.32% to 113.63% for the class B notes and from 96.02% to 96.40% for the class C notes (May 2014 - May 2015), respectively. The trust cannot release any excess cash until the class C parity reaches 104.5%.

Liquidity Support: Liquidity support for the trust is provided by a debt service reserve fund which is currently at $10.2 million, representing 3.5% of the outstanding pool balance.

Servicing Capabilities: Day-to-day servicing is provided by KeyBank, N.A. Fitch believes the servicing operations are acceptable servicer of private student loans.

RATING SENSITIVITIES

As Fitch's base case default proxy is derived primarily from historical collateral performance, actual performance may differ from the expected performance, resulting in higher loss levels than the base case. This will result in a decline in CE and remaining loss coverage levels available to the bonds and may make certain bond ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage. Fitch will continue to monitor the performance of the trust.

Fitch has taken the following rating actions:

--Senior class II-A-3 upgraded to 'AAsf' from 'Asf'; Outlook Stable;

--Senior class II-A-4 upgraded to 'AAsf' from 'Asf'; Outlook Stable;

--Subordinate class II-B affirmed at 'B+sf'; Outlook Stable;

--Junior Subordinate class II-C affirmed at 'CCsf'; RE 0%.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. Private Student Loan ABS Criteria (pub. 31 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868836

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990358

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990358

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Emily Lee
Director
+1-212-908-0667
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Emily Lee
Director
+1-212-908-0667
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com