DBRS Finalizes Ratings of AAA (sf) and BBB (sf) for Master Credit Card Trust, Series 2012-1

DBRS has today finalized the ratings for the Credit Card Receivables-Backed Notes, Series 2012-1 (the Notes) issued by Master Credit Card Trust (the Trust) as follows:

– AAA (sf) for the Credit Card Receivables-Backed Class A Notes, Series 2012-1
– BBB (sf) for the Credit Card Receivables-Backed Class B Notes, Series 2012-1

The Notes have an expected final payment date of January 21, 2017.

The ratings are based on the following factors:

(1) For the Class A Notes, credit enhancement is available through subordination of 5.5%, excess spread and the Cash Collateral Account, which could build up to 5%.

(2) For the Class B Notes, credit enhancement is available through excess spread and the Cash Collateral Account.

(3) Over the past three years, three-month average payment rates have been strong, averaging about 37%, and three-month average gross yields have been stable at greater than 21%. While the three-month average loss rate peaked at 5.0% in March 2010, it has since been steadily declining and stood at 3.9% as of November 2011, one of the lowest in Canada. While current loss rates remain elevated compared with the experience prior to the recent financial crisis, this is mitigated by excess spread, which is expected to provide a solid first defense against credit losses.

(4) Bank of Montreal (BMO) offers a successful loyalty program and it has the experience and demonstrated ability to manage the largest MasterCard portfolio in Canada.

(5) The receivables are seasoned and well diversified.

DBRS stress testing indicates that simultaneous declines in yield and payment rates and increases in 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.

As the accounts are sold on a fully serviced basis, no servicing fee will be paid to BMO as long as BMO remains the servicer. BMO may remit collections as required to the collection account on each distribution day, with no obligation to segregate the collections from its general funds, as long as it maintains a minimum short-term rating of R-1 (low). If the servicer fails to maintain this rating, remittance of collections to the collection account in the name of the custodian will be required within two business days of processing. The Trust has incorporated DBRS’s partial commingling policy for revolving asset pools. 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.

As the Trust is structured as a master trust, all series of notes are supported by the same pool of receivables and are generally issued under the same requirements with respect to servicing, accumulation period, amortization events, priority of distributions and eligible investments. The performance and characteristics of the custodial pool are available and updated each month in the Monthly Canadian ABS Report prepared by DBRS. DBRS conducts a monthly stress testing of each rated class, with the severity of the tests applied commensurate with the respective ratings assigned. In conjunction with the issuance of the Notes, DBRS has also confirmed the following outstanding notes of the Trust:

-- AAA (sf) for Credit Card Receivables-Backed Class A Notes, Series 2008-1
-- AA (sf) for Credit Card Receivables-Backed Class B Notes, Series 2008-1
-- “A” (sf) for Credit Card Receivables-Backed Class C Notes, Series 2008-1
-- BBB (sf) for Credit Card Receivables-Backed Class D Notes, Series 2008-1
-- AAA (sf) for Credit Card Receivables-Backed Class A Notes, Series 2008-2
-- AA (sf) for Credit Card Receivables-Backed Class B Notes, Series 2008-2
-- “A” (sf) for Credit Card Receivables-Backed Class C Notes, Series 2008-2
-- BBB (sf) for Credit Card Receivables-Backed Class D Notes, Series 2008-2
-- AAA (sf) for Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2008-3
-- AA (sf) for Credit Card Receivables-Backed Class B Floating Rate Notes, Series 2008-3
-- “A” (sf) for Credit Card Receivables-Backed Class C Floating Rate Notes, Series 2008-3
-- BBB (sf) for Credit Card Receivables-Backed Class D Floating Rate Notes, Series 2008-3
-- AAA (sf) for Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2008-4
-- AA (sf) for Credit Card Receivables-Backed Class B Floating Rate Notes, Series 2008-4
-- “A” (sf) for Credit Card Receivables-Backed Class C Floating Rate Notes, Series 2008-4
-- BBB (sf) for Credit Card Receivables-Backed Class D Floating Rate Notes, Series 2008-4
-- AAA (sf) for Credit Card Receivables-Backed Class A Notes, Series 2011-1
-- BBB (sf) for Credit Card Receivables-Backed Class B Notes, Series 2011-1
-- AAA (sf) for Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2011-2
-- BBB (sf) for Credit Card Receivables-Backed Class B Floating Rate Notes, Series 2011-2

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

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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