Fitch Affirms KeyCorp Student Loan Trust 1999-A & 1999-B

2008-08-22 22:57:02 -

- Fitch Ratings has affirmed the following classes from two KeyCorp Student Loan Trusts:

KeyCorp Student Loan Trust 1999-A

--Class A-2 'AAA'

--Class B 'A'.

KeyCorp Student Loan Trust 1999-B

--Class A-2 'AAA'

--Class M 'AAA'

--Class B 'A+'.

Fitch's actions are based on the collateral and trust performance to date and

the legal and financial structure. These structural features require that excess spread be used to pay note and certificate principal instead of being released to KeyBank, N.A., if the assets are not sold at a price that makes investors whole on the initial call date.

The collateral supporting the KeyCorp 1999-A and 1999-B trusts consist of both federally guaranteed loans originated under the Federal Family Education Loan Program (FFELP) and private student loans, the majority of which is guaranteed against default by The Education Resources Institute (TERI). As of May 31, 2008, the KeyCorp 1999-A portfolio is comprised of 45.9% FFELP loans and 54.1% private loans guaranteed against default primarily by TERI. As of April 30, 2008, KeyCorp Student Loan Trust 1999-B is comprised of 32.8% FFELP loans, 43.4% private loans guaranteed against default primarily by TERI, and 23.8% non-guaranteed Key private student loans.

On April 7, 2008, TERI filed bankruptcy and as part of the filing, has stopped paying claims on loans submitted from the two KSLT trusts. These loans currently remain in claim status within each trust and continue to be included in the parity calculation. The collateral remaining in each trust has seasoned such that a majority of the expected defaults have already occurred. As a result, there has not been a substantial amount of defaults occurring in the past 12 months. For the duration of the deal, Fitch does not except an increase in defaults for either of these collateral, lessoning the reliance on any expected payments from TERI.

As of the last remittance report, the parity ratio calculated with the reserve account for KSLT 1999-A and 1999-B were 100.83% and 101.82%, respectively. Each trust has also generated sufficient cash flow to cover losses from any private student loan defaults and pay required debt service, with excess amounts released to KeyBank, N.A., on each distribution date for at least the past year.

TERI guaranteed loans that have been submitted to TERI but not paid continue to remain in 'claim filed' status within the respective trust portfolio. This amount has steadily increased each month. As per the legal documents, these nonperforming loans are accounted for as assets when determining whether excess can be released from the trust. Fitch does not expect this to have a material impact on any note and certificate principal and interest payments as the initial clean up call is scheduled to occur within the next 7 and 15 months for KSLT 1999-A and 1999-B trusts, respectively.

On the March and November 2009 distribution dates for KSLT 1999-A and 1999-B, respectively, the respective trust assets will be offered for sale. If a bid is not received that at a minimum, is equal to the amount of the note and certificate principal outstanding and interest due, amounts remaining after paying required note and certificate principal and interest will no longer be released from the trust. This amount will instead be used as turbo payments of note and certificate principal. These turbo payments will create sufficient overcollateralization to compensate for any claims that are not paid by TERI.

KeyCorp Student Loan Trust Collateral and Servicing:

The KeyCorp 1999-A and 1999-B trusts consist of FFELP, third party guaranteed private student loans and nonguaranteed private student loans. The private student loans are intended to assist individuals in financing their undergraduate or graduate education beyond what the FFELP affords. All of the private loans were originated under the respective TERI or nonguaranteed Key private student loan program underwriting guidelines.

The KeyCorp 1999-A trust student loans are serviced by the Pennsylvania Higher Education Assistance Agency (PHEAA). The KeyCorp 1999-B trust student loans are serviced by PHEAA and Great Lakes Educational Loan Services, Inc. (rated 'Proficient Plus' for FFELP and 'Proficient' for private loans by Fitch).

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings, New York
Andrea Murad, +1-212-908-0896
Gary Santo, +1-212-908-9172
Sandro Scenga, +1-212-908-0278 (Media Relations)