DBRS Finalizes Ratings of AAA, “A” and BBB for Canadian Credit Card Trust, Series 2010-1

DBRS has today finalized the ratings for the Credit Card Receivables-Backed Notes, Series 2010-1 (the Notes) issued by Canadian Credit Card Trust (the Trust) as indicated below:

– AAA for the Credit Card Receivables-Backed Class A Notes, Series 2010-1 (the Class A Notes)
– “A” for the Credit Card Receivables-Backed Class B Notes, Series 2010-1 (the Class B Notes)
– BBB for the Credit Card Receivables-Backed Class C Notes, Series 2010-1 (the Class C Notes)

The ratings are based on the following factors:

(1) Credit support provided by subordination of 6.25% and 2.75% for the Class A Notes and Class B Notes, respectively; excess spread; and the series reserve account, which could build up to 5%.

(2) Over the past two years, three-month average payment rates and gross yields remained stable and greater than 28% and 20%, respectively.

(3) The custodial pool is well seasoned, with approximately 80% of the receivables arising from accounts greater than 48 months old.

The portfolio is largely concentrated in Québec, which is both positive and negative. From a positive perspective, the portfolio has been comparatively insulated from the competition in the rest of Canada. Notwithstanding the relative insulation, three-month average loss rates increased from 3.8% to a peak of 6.5% over the past two years, similar to the experience of the entire Canadian credit card industry. The increase in losses, which moderated to 5.9% as of March 31, 2010, is further mitigated by stable payment rates and portfolio yields and declining delinquencies. From a negative perspective, there is considerably more geographic and regional economic risk with the concentration in Québec.

The subordination for the Class A Notes is 0.75% higher than the 5.50% available to Class A certificates of other outstanding series issued by the Trust (the Existing Series). Furthermore, to provide additional support for the Class C Notes, which only have excess spread as credit support, the 2010-1 series reserve account will begin trapping excess spread if the three-month average excess spread drops below 6%. This threshold is 2% higher than the 4% for the Existing Series.

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

The Trust 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