DBRS Finalizes Ratings for CARDS II Trust, Series 2010-1 and 2010-2

DBRS has today finalized the ratings of the Credit Card Receivables-Backed Floating Rate Notes, Series 2010-1, Class A Notes and Credit Card Receivables-Backed Notes, Series 2010-2, Class A Notes (collectively, the Class A Notes) and the Credit Card Receivables-Backed Floating Rate Notes, Series 2010-1, Class B Notes and Credit Card Receivables-Backed Notes, Series 2010-2, Class B Notes (collectively, the Class B Notes; collectively, with the Class A Notes, the Notes) issued by CARDS II Trust (the Trust) as indicated below:

– AAA to the Credit Card Receivables-Backed Floating Rate Notes, Series 2010-1, Class A
– AAA to the Credit Card Receivables-Backed Notes, Series 2010-2, Class A
– BBB (low) to the Credit Card Receivables-Backed Floating Rate Notes, Series 2010-1, Class B
– BBB (low) to the Credit Card Receivables-Backed Notes, Series 2010-2, Class B

The ratings are based on the following factors:

(1) For the Class A Notes, credit enhancement is available through subordination of 10.25% and 7.25% for Series 2010-1 and Series 2010-2, respectively; excess spread; and the series reserve account, which could build up to 5%.

(2) For the Class B Notes, credit enhancement is available through excess spread and the series reserve account, which could build up to 5%.

(3) Over the past two years, three-month average payment rates remained greater than 35%. While three-month average loss rates increased from 3.4% to 7.1% during the same period, loss rates and delinquencies are declining and stabilizing. The removal of the 2% cap on interchange fees on June 25, 2009, increased protection for the Noteholders and helped mitigate the impact of the loss rate increases.

(4) The custodial pool is seasoned and well diversified and is also the largest 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 the Notes.

As the Class B Notes rely largely on excess spread for credit support, DBRS’s analysis indicates that the Class B Notes are expected to withstand stress multiples in the more lenient range of the BBB rating category. This results in a BBB (low) rating, lower than the ratings of the comparable lowest rated class (class C) of other series issued by the Trust.

The Notes are one of the first credit card transactions issued in the public market in Canada since August 2008. The Trust also incorporated 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.

MEDIA CONTACT:
Caroline Creighton
Senior Vice President,
Communications
Tel. +1 416 597 7317
ccreighton@dbrs.com