Fitch Upgrades KeyCorp Student Loan Trust 2004-A (Group II) Class II-B

NEW YORK--()--Fitch Ratings upgrades the rating of the class II-B notes and affirms the classes II-A-2, II-C and II-D notes of KeyCorp Student Loan Trust 2004-A (Group II). The Rating Outlook for the class II-A, class II-B and class II-C notes is Stable. The Recovery Estimate for the class II-D notes was increased to 35% from 0%.

The upgrade of class II-B is based on a sufficient loss coverage multiple commensurate with a 'AAAsf' rating. The class II-B parity level has increased to 255.0%.

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 $152 million private student loans as of June 2016. The loans were originated primarily by KeyBank, NA. The projected remaining defaults are expected to range between 15%-20% as a percentage of current principal balance. A recovery rate of 10% was applied which was determined to be appropriate based on data provided by the issuer.

Credit Enhancement (CE): CE is provided by overcollateralization, excess spread and subordination for the class A and B notes. Additionally, the trust can receive excess from its bifurcated KSLT 2004-A Group I pool. As of the June 2016 distribution, the reported total parity without including funds in the reserve account is 93.8%. Fitch gives credit to the reserve balance and calculated the class A, B, C and D parity ratios as 780.4%, 255.0%, 122.8%, and 97.5% respectively.

Liquidity Support: Liquidity support for the trust is provided by a debt service reserve fund which is currently at $6 million, representing approximately 3.5% of aggregate beginning outstanding principal amount of the group II notes.

Servicing Capabilities: Day-to-day servicing is provided by KeyBank, NA (master servicer), Pennsylvania Higher Education (sub-servicer) Assistance Agency, and Great Lakes Educational Loan Services, Inc. (sub-servicer). Fitch believes the servicing operations are acceptable servicers of student loans due to their long history.

CRITERIA VARIATIONS

Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated Sept. 1, 2016, Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness. The definition of the permitted investment for this deal allows possibility of using investments that do not meet Fitch's criteria, this represents a criteria variation. Since the only available funds to invest in are those held in the Collection Account, and the funds can only be invested for a short duration of three months given the payment frequency of the notes, Fitch doesn't believe such variation has a measurable impact upon the ratings assigned.

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.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch takes the following rating actions:

KeyCorp Student Loan Trust 2004-A (Group II)

--Class II-A-2 affirmed at 'AAAsf'; Outlook Stable;

--Class II-B upgraded to 'AAAsf' from 'AAsf'; Outlook Stable;

--Class II-C affirmed at 'BBBsf'; Outlook Stable;

--Class II-D affirmed at 'CCsf'; RE35%.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/site/re/879815

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

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

https://www.fitchratings.com/site/re/868836

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011470

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011470

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