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Rating Action:

Moody's confirms five tranches and takes actions on thirteen tranches in eight of KeyCorp's student loan deals

01 Nov 2010

Approximately $1.9 billion of asset-backed securities affected

New York, November 01, 2010 -- Moody's Investors Service concluded its review of eight KeyCorp's student loan transactions. It downgraded twelve classes, upgraded one class and confirmed the ratings of five classes of notes. Some of the affected classes are collateralized by pools that include both FFELP and private student loans and some by pools of exclusively private student loans.

RATINGS RATIONALE

The downgrades were prompted by a deterioration in performance of the private student loan collateral. In some cases the deterioration is significant, with our expected losses increasing by as much as 70%. Our revised expected net losses across all affected deals range between 4% and 20% of the original pool balance (or the original balance of the private loan group for the deals in which private and FFELP loans are separated into separate groups).

As of the July 2010 distribution date, cumulative defaults on private student loans of the transactions closed prior to 2001 were 5%-7% of the original pool balances. The cumulative defaults of the transactions that closed in 2001 or thereafter ranged from 12%-18% of the original private student loan pool balances. In particular, the significantly worse performance of the post 2003 transactions can be explained in part by the composition of the underlying student loan pools: we see higher percentage of Key Career loans and Campus Dooor Loans in these transactions compared to 2001-2003 transactions. Key Career loans are loans primarily to adult vocational education students, and Campus Door loans were originated through the direct-to-consumer (DTC) channel. Both of these products have higher default rates than loans to undergraduate and graduate students originated through the schools' financial aid offices.

The high defaults have been eroding the collateral base and have caused steady declines in the parity levels of the 2004, 2005, and 2006 transactions. Between May 2009 and May 2010 the total parity of these transactions has decreased from a range of 94%-101% to a range of 92%-99%. The parity levels of the 2002 and 2003 transactions have remained stable at 100% due to draws on the cash reserve accounts in order to supplement collections and meet the required payment obligations.

Although the delinquencies have either stabilized or even improved over the past year, periodic defaults remain at elevated levels, which could indicate that the roll rates from delinquencies to defaults have increased.

Available credit enhancement in most transactions has been declining. High defaults have depleted overcollateralization in all post 2000 transactions to the point that in some deals, subordinated classes are not even fully collateralized with the student loan collateral. Other forms of credit enhancement include reserve funds, subordination, and excess spread. Some senior notes (2003 and later transactions) also benefit from the subordinate note interest trigger event, which redirects interest payments on the subordinate notes to principal payments on the senior notes.

Our expected lifetime net losses as a percentage of the original pool balance plus any loans added subsequently are 4.4%, 5.2%, 7.6%, 12%, 16.8%, 19.6%, 17.6%, and 20% for the 1999-A, 2000-A, 2000-B trusts and 2001-A , 2003-A , 2004-A , 2005-A , and 2006-A private student loan pools, respectively. The ratings across almost all tranches could be upgraded if lifetime expected net losses were 10% lower, or downgraded if the lifetime expected net losses were 10% higher. The ratings of Class II A-2 of the 2004 trust and Classes II A-3 and II-C of the 2006 transaction will not be affected in the future if lifetime expected net losses are 10% lower or 10% higher than the levels indicated above.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of uncertainty with regard to expected losses are the weak economic environment and the high unemployment rate, which adversely impacts the income-generating ability of the borrowers. Overall, Moody's central global scenario remains "Hook-shaped" for 2010 and 2011; we expect overall a sluggish recovery in most of the world largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels.

The principal methodology used in KeyCorp Student Loan Trust rating was "Moody's Approach to Rating U.S. Private Student Loan-Backed Securities", published on January 6th, 2010.

In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

Complete rating actions are as follows:

Issuer: KeyCorp Student Loan Trust 1999-A

Certificates, Upgraded to Aa2 (sf), previously on July 22,2010 A1 (sf) Placed Under Review for Possible Downgrade

Issuer: KeyCorp Student Loan Trust 2000-A

Cl. A-2, Downgraded to Baa2 (sf), previously on July 22,2010 Aa2 (sf) Placed Under Review for Possible Downgrade

Issuer: KeyCorp Student Loan Trust 2000-B

Cl. A-2, Downgraded to B1 (sf), previously on July 22,2010 Aa2 (sf) Placed Under Review for Possible Downgrade

Issuer: KeyCorp Student Loan Trust 2001-A

Cl. II-A-2, Downgraded to Baa3 (sf), previously on July 22,2010 Aa2 (sf) Placed Under Review for Possible Downgrade

Issuer: KeyCorp Student Loan Trust 2003-A

Cl. II-A-3, Downgraded to Aa1 (sf), previously on July 22,2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. II-A-IO, Downgraded to Aa1 (sf), previously on July 22,2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. II-B, Downgraded to Baa3 (sf), previously on July 22,2010 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: KeyCorp Student Loan Trust 2004-A

Class II-A-2, Confirmed at Aaa (sf), previously on July 22,2010 Aaa (sf) Placed Under Review for Possible Downgrade

Class II-B, Confirmed at Aa3 (sf), previously on July 22,2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Class II-C, Confirmed at Baa3 (sf), previously on July 22,2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Class II-D, Downgraded to Ca (sf), previously on July 22,2010 B2 (sf) Placed Under Review for Possible Downgrade

Issuer: KeyCorp Student Loan Trust 2005-A

Cl. II-A-4, Confirmed at Aaa (sf), previously on July 22,2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. II-B, Downgraded to Baa2 (sf), previously on July 22,2010 A2 (sf) Placed Under Review for Possible Downgrade

Cl. II-C, Downgraded to Caa1 (sf), previously on July 22,2010 Ba3 (sf) Placed Under Review for Possible Downgrade

Issuer: KeyCorp Student Loan Trust 2006-A

Cl. II-A-3, Confirmed at Aaa (sf), previously on July 22,2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. II-A-4, Downgraded to Aa3 (sf), previously on July 22,2010 Aa1 (sf) Placed Under Review for Possible Downgrade

Cl. II-B, Downgraded to Ba3 (sf), previously on July 22,2010 Baa2 (sf) Placed Under Review for Possible Downgrade

Cl. II-C, Downgraded to C (sf), previously on July 22,2010 B1 (sf) Placed Under Review for Possible Downgrade

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Irina Faynzilberg
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Jerry Lu
Senior Associate
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's confirms five tranches and takes actions on thirteen tranches in eight of KeyCorp's student loan deals
No Related Data.
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