Fitch Takes Various Actions on KeyCorp Student Loan Trust 2005-A (Group II)
The upgrade of class II-A-4 is based on a sufficient loss coverage multiple commensurate with a 'AAAsf' rating. The class II-A-4 parity level has increased to 302.1%.
The downgrade of class II-C is due to an insufficient loss coverage multiple to maintain its current rating of 'BBsf'. Additionally, it is unlikely the current reported parity of 101% will increase, since the trust has reached it cash release level.
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 $171 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 16%-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 2005-A Group I pool. As of the June 2016 distribution, the reported total parity without including funds in the reserve account is 101%, which is also the target release level. Fitch gives credit to the reserve balance and calculated the class A, B and C parity ratios as 302.1%, 132.4%, and 104.5% 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 the outstanding pool balance.
Servicing Capabilities: Day-to-day servicing is provided by KeyBank, NA (master servicer), Pennsylvania Higher Education Assistance Agency (sub-servicer), 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.
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 does not believe such variation has a measurable impact upon the ratings assigned.
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 2005-A (Group II)
--Class II-A-4 upgraded to 'AAAsf' from 'AAsf'; revised Outlook to Stable from Positive;
--Class II-B affirmed at 'BBBsf'; Outlook Stable;
--Class II-C downgraded to 'Bsf' from 'BBsf'; Outlook Negative.