DBRS Confirms the Ratings of Glacier Credit Card Trust

As part of DBRS’s continued effort to provide market participants with updates on an annual basis, DBRS has today confirmed the ratings on the following notes (collectively, the Notes) issued by Glacier Credit Card Trust (the Trust)

– R-1 (high) (sf) for Asset-Backed Commercial Paper, Series 1997-1
– AAA (sf) for Asset-Backed Senior Notes, Series 2006-2
– “A” (sf) for Asset-Backed Subordinated Notes, Series 2006-2
– AAA (sf) for Credit Card Asset-Backed Senior Notes, Series 2008-1
– “A” (sf) for Credit Card Asset-Backed Subordinated Notes, Series 2008-1
– AAA (sf) for Credit Card Asset-Backed Senior Notes, Series 2010-1
– “A” (sf) for Credit Card Asset-Backed Subordinated Notes, Series 2010-1

The rating confirmation is based on the following factors:

(1) For the AAA-rated Senior Notes, the credit protection is provided by subordination of 5.5% of the initial invested amount, the 5.5% enhancement amount of the initial invested amount and excess spread generated from the receivables.

(2) For R-1 (high) rated Series 1997-1, the credit protection is provided by the enhancement amount of 11.5% (as of October 31, 2011) and excess spread generated from the receivables.

(3) For the A-rated Subordinated Notes, the credit protection is provided by the 5.5% enhancement amount and excess spread generated from the receivables.

(4) Payment rates have remained relatively stable at about 25% over the last three years. The gross yield has also remained stable with a slight increase of approximately 1% from 2008 that mitigated the increased losses during the same period. Excess spread for each series remains stable as well.

(5) The custodial pool is a well-diversified and seasoned portfolio. The number of accounts in the selected pool exceeded 4.8 million as of October 14, 2011.

The Trust participates in a co-ownership structure, which means the proceeds from each series of Notes were used to purchase an undivided co-ownership interest in the receivables of the designated accounts in the custodial pool. Each co-ownership interest is separate from and in addition to co-ownership interests previously created. Canadian Tire Bank (CTB), as the seller, retains the residual undivided co-ownership interest (Retained Interest) in the custodial pool. The receivables include all amounts to be collected under the designated accounts, such as interest charges, recoveries, monthly fees, administrative fees, interchange fees (which is not available for Series 1997-1), late charges and principal amounts billed to cardholders. The Retained Interest is at least 7% for all series of Notes.

As the accounts are sold on a fully serviced basis, no servicing fee will be paid as long as CTB or an affiliate of Canadian Tire Corporation remains as the servicer. The servicer shall remit collections as required to the Collection Account on the business day prior to the relevant payment date, with no obligation to segregate the collections with respect to the receivables provided that Canadian Tire Corporation (CTC) maintains a minimum short term rating of R-1 (low) by DBRS. While CTB is currently not permitted to fully commingle collections, as CTC does not meet the minimum rating requirement, it is allowed to commingle the amount in excess of what is required to be paid or deposited for the next distribution date (partial commingling) as outlined in the DBRS Legal Criteria for Canadian Structured Finance (see Related Research below). 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.

Notwithstanding the stated expected repayment dates of the Notes, certain events may result in early repayment or delays of one or more series. Such events are called amortization events. Following the occurrence of a series amortization event, collections allocable to this series will be directed first to pay Trust expenses, second to repay all accrued and unpaid interest on the series senior and subordinated notes sequentially, third to repay the outstanding principal of the senior notes until it is zero, followed by principal repayments of the subordinated notes until it is zero. Accrued and unpaid interest on the Enhancement Notes, followed by outstanding principal amounts, will be paid after the senior and subordinated notes have been fully repaid. Essentially, this provides the more senior notes preferential access to the cash flows generated from the receivables for principal repayments, in an amount equal to the subordination available for this class of notes.

The accounts in the custodial pool are originated and managed by CTB, as seller and servicer, according to its underwriting standards and credit and collection policies. In order to be eligible for transfer to the custodial pool, accounts must meet certain criteria. There are also restrictions on account additions by CTB, as seller, to ensure consistent credit quality of the custodial pool. CTB does not offer the Canadian Tire credit card to new applicants any more. All new accounts must meet the MasterCard standards. CTB is an indirect, wholly owned subsidiary of CTC, which is one of the largest retailers in Canada.

As the Trust participates in a co-ownership structure, all series of Notes are supported by the same pool of receivables and generally issued under the same requirements in respect of servicing, accumulation period, amortization events, priority of distributions and eligible investments. However, these requirements may be series specific. For more detailed information on the transaction structure, please refer to the rating reports of the Trust at www.dbrs.com.

The performance and characteristics of the custodial pool and the Notes are available and updated each month in the Monthly Canadian ABS Report and in the Monthly Canadian ABCP Report (see Related Research below). DBRS conducts 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:
The applicable methodologies are DBRS Criteria for Canadian Credit Card Securitization and Legal Criteria for Canadian Credit Card Securitization, which are available on our website under Methodologies.