DBRS Comments on Gloucester Credit Card Trust

DBRS notes that there is no rating impact on the outstanding notes (the Notes) issued by Gloucester Credit Card Trust (the Trust) as a result of today’s account addition of approximately $1.14 billion (the Addition), which follows the removal of approximately $2.25 billion receivables on March 18, 2011 (the Removal). The ratings on the Notes were recently confirmed by DBRS on January 21, 2011.

While the amounts of the Removal and the Addition are large, DBRS notes that account removals and additions for credit card securitization trusts are common, as long as certain conditions are met. For example, the selection of removed accounts must be random and minimum seller interest after account removal must be maintained, which is 5% for the Trust. As a result of the random selection process of removed accounts, DBRS considers the Removal to have little impact on the performance of the Trust.

On the other hand, account additions can be completed based on eligibility criteria, which for the Trust are:

(a) The account is in existence and maintained with the Seller.
(b) The account is payable in Canadian dollars.
(c) The most recent billing address of the account is in Canada.
(d) The account is not classified as counterfeit, cancelled, fraudulent, stolen, lost or held by a bankrupt or deceased person.
(e) The account has not been charged off.

Based on the information provided by the seller, DBRS expects the Addition will not have a negative effect on the performance of the Trust and therefore will not result in a downgrade or withdrawal of the ratings of the Notes.

The performance and characteristics of the custodial pool and the Notes are available and updated each month in DBRS’s Monthly Canadian ABS Report (see Related Research below). DBRS conducts a monthly stress testing of each rated class of the Notes and the results indicate 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.

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

The applicable methodologies are DBRS Criteria for Canadian Credit Card Securitization, Legal Criteria for Canadian Structured Finance and Swap Criteria for Canadian Structured Finance Transactions, which are available on our website under Methodologies.