DBRS Assigns Provisional Rating of AAA and BBB (high) to Golden Credit Card Trust, 2010-1 and 2010-2

DBRS has today assigned provisional ratings to the Credit Card Receivables-Backed Senior Notes, Series 2010-1 and Credit Card Receivables-Backed Floating Rate Senior Notes, Series 2010-2 (collectively, the Senior Notes) and the Credit Card Receivables-Backed Subordinated Notes, Series 2010-1 and Series 2010-2 (collectively, the Subordinated Notes; collectively with the Senior Notes, the Notes) to be issued by Golden Credit Card Trust (the Trust) as indicated below:

– AAA to the Credit Card Receivables-Backed Senior Notes, Series 2010-1
– AAA to the Credit Card Receivables-Backed Floating Rate Senior Notes, Series 2010-2
– BBB (high) to the Credit Card Receivables-Backed Subordinated Notes, Series 2010-1
– BBB (high) to the Credit Card Receivables-Backed Subordinated Notes, Series 2010-2

The finalization of the ratings is contingent upon receipt of final documents conforming to information already received.

It is expected interest rate swaps will be employed for Series 2010-2 Senior Notes.

The ratings are based on the following factors: Firstly, for the Senior Notes, credit enhancement will be available through subordination of 4.5% (assuming effective fixed-rate funding after the interest rate swap for Series 2010-2), excess spread expected to be approximately 14% at closing and the series reserve account, which could build up to 5%. For the Subordinated Notes, the credit enhancement available will be composed of excess spread and the series reserve account. Secondly, the historical performance of the Trust’s portfolio has been strong and demonstrated resilience throughout the recent economic downturn. Over the past two years, three-month average payment rates remained greater than 34% and although three-month average loss rates increased from 2.3% to 3.9%, the Trust still has one of the lowest loss rates of any Canadian issuer. Such resilience is in part the result of a highly seasoned custodial pool with strong credit quality. Furthermore, the inclusion of interchange fees in the yield available to the Trust in October 2009 mitigated the impact of the increase in loss rates and increased the protection for the Noteholders. Lastly, the custodial pool is a well-diversified portfolio, originated and managed by Royal Bank of Canada, the largest financial institution in Canada.

DBRS’s stress testing indicates that steep declines in yield and payment rates, combined with high losses, would not result in a failure of the Trust in repaying the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of all classes of Notes.

The Notes will be the first credit card transaction issued in the public market in Canada since August 2008. In addition, the Trust is the first Canadian credit card program to incorporate DBRS’s partial commingling policy, released on June 23, 2009. DBRS believes that the partial commingling provisions mitigate potential losses to the Noteholders and also provide clarification to market participants with respect to the collection process if the seller/servicer is financially weakened.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is DBRS Criteria for Canadian Credit Card Securitization, which can be found on our website under Methodologies.

This is a Structured Finance rating.