DBRS Comments on Gloucester Credit Card Trust

DBRS has today commented on Gloucester Credit Card Trust (the Trust), following the announcement on August 15, 2011 that the credit card receivables (the Portfolio) of MBNA Canada Bank (MBNA Canada) will be sold to The Toronto-Dominion Bank (TD) (the Sale). The Portfolio consists of MBNA Canada’s entire credit card receivables of $8.6 billion as of July 31, 2011.

The closing of the Sale is expected to occur in the fourth quarter of 2011, subject to regulatory approvals and customary closing conditions for such Sale. After the closing, the MBNA Canada brand will be maintained during the transition period of approximately 18 months to facilitate conversion and integration. DBRS expects that after the closing, TD will replace MBNA Canada as the seller and servicer for the securitized pool of the Trust and will assume associated responsibilities with respect to the Trust. Excluding the Series 2001-2 Notes which are expected to mature today, the Trust has four series of notes outstanding of approximately $1.25 billion, with the last expected maturity date of May 15, 2014.

The Portfolio is the largest MasterCard credit card portfolio in Canada. As with any servicing conversion, DBRS considers that there may be a risk of servicing disruptions during the transition period. In addition, the Portfolio may pose integration challenges for TD due to the different account characteristics, as the Portfolio is experiencing higher loss rates than TD’s current credit card portfolio. As the securitized pool balance is likely to decline until the conversion is completed due to account attritions with no or little account addition, DBRS expects the Trust’s loss rate to increase in the near term, albeit not in a significant way.

In spite of some potential challenges in the near term, overall DBRS considers the Sale as moderately positive for the performance of the Trust.

DBRS will continue to monitor the performance of the Trust and may issue further commentaries as the terms and conditions of the Sale are made public.

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

Media Contact
Caroline Creighton
Senior Vice President
Communications
Tel. +1 416 597 7317
ccreighton@dbrs.com