DBRS Assigns Provisional Ratings of AAA (sf) and BBB (low) (sf) to CARDS II Trust, Series 2011-1, Series 2011-2 and Series 2011-3

DBRS has today assigned provisional ratings to the Credit Card Receivables Backed Floating Rate Notes, Series 2011-1, Series 2011-2 and Series 2011-3 to be issued by CARDS II Trust (the Trust) as indicated below:

– AAA (sf) to the Credit Card Receivables Backed Floating Rate Class A Notes, Series 2011-1
– AAA (sf) to the Credit Card Receivables Backed Floating Rate Class A Notes, Series 2011-2
– AAA (sf) to the Credit Card Receivables Backed Floating Rate Class A Notes, Series 2011-3 (collectively with Series 2011-1 and Series 2011-2, the Class A Notes)
– BBB (low) (sf) to the Credit Card Receivables Backed Floating Rate Class B Notes, Series 2011-1
– BBB (low) (sf) to the Credit Card Receivables Backed Floating Rate Class B Notes, Series 2011-2
– BBB (low) (sf) to the Credit Card Receivables Backed Floating Rate Class B Notes, Series 2011-3 (collectively with Series 2011-1 and Series 2011-2, the Class B Notes; collectively with the Class A Notes, the Notes)

The ratings are based on the following factors:

(1) For the Class A Notes, credit enhancement will be available through subordination of 10.25%, excess spread and the series-specific cash reserve accounts, which could build up to 5%.

(2) For the Class B Notes, credit enhancement will be available through excess spread and the series-specific cash reserve accounts.

(3) Over the past two years, three-month average payment rates remained above 35%. While three-month average loss rates increased from below 4.0% before the recent recession to 7.1% in mid-2009, they have since moderated and are currently stabilizing at around 5%. The gross yield stayed consistently above 20% since the removal of the 2% cap on interchange fees in June 2009, which also helped mitigate the impact of the loss rate increases.

(4) The custodial pool is seasoned and well diversified and is the largest in Canada.

DBRS’s stress testing indicates that simultaneous declines in yield and payment rates and increases in 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 (sf) rating category. This results in a (low) designation. The BBB (low) (sf) rating is identical to that assigned to the comparable class B notes issued by the Trust in 2010.

DBRS’s partial commingling policy for revolving asset pools has been incorporated for the Notes. 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 methodologies are DBRS Criteria for Canadian Credit Card Securitization and Legal Criteria for Canadian Structured Finance, which can be found on our website under Methodologies.

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