DBRS Assigns Provisional Ratings of AAA (sf) and BBB (high) (sf) to Golden Credit Card Trust, Series 2012-1 and Series 2012-2

DBRS has today assigned provisional ratings to the Credit Card Receivables-Backed Notes, Series 2012-1 and Series 2012-2 (collectively, the Notes) to be issued by Golden Credit Card Trust (the Trust) as follows:

-- AAA (sf) to the Credit Card Receivables-Backed Senior Floating Rate Notes, Series 2012-1
-- AAA (sf) to the Credit Card Receivables-Backed Senior Notes, Series 2012-2 (collectively, with Series 2012-1, the Senior Notes)
-- BBB (high) (sf) to the Credit Card Receivables-Backed Subordinated Notes, Series 2012-1
-- BBB (high) (sf) to the Credit Card Receivables-Backed Subordinated Notes, Series 2012-2 (collectively, with Series 2012-1, the Subordinated Notes)

The Senior Notes and Subordinated Notes are expected to be denominated in U.S. dollars and Canadian dollars, respectively. A cross-currency, interest rate swap is expected to be in place for the Series 2012-1 Senior Notes and a cross-currency swap is expected to be in place for the Series 2012-2 Senior Notes.

The finalization of the ratings is contingent upon receipt of final documents conforming to information already received.

The ratings are based on the following factors:

(1) For the Senior Notes, credit enhancement will be available through subordination of 4.5%, excess spread and the Series Reserve Account, which could build up to 5%.

(2) For the Subordinated Notes, credit enhancement will be available through excess spread and the Series Reserve Account.

(3) The performance of the Trust’s portfolio has been strong since inception and demonstrated resilience throughout the recent economic downturn. Over the past two years, the three-month average payment rates have hovered around 40%. At the same time, loss rates remained the lowest in Canada. While the three-month average loss rate peaked at 3.9% in November 2009, it has since been steadily decreasing and stood at 2.6% as of December 2011, slightly above the levels experienced prior to the recent economic downturn. In addition, the inclusion of interchange in October 2009 increased gross yield available to the Trust, which mitigated the elevated loss rates and resulted in significantly higher excess spread as the first defense against credit losses.

(4) The custodial pool is a well-diversified and seasoned portfolio of prime credit quality obligors, originated and managed by Royal Bank of Canada, the largest financial institution in Canada.

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 in repaying the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of the Notes.

DBRS’s analysis also indicates that the Subordinated Notes are expected to withstand more punitive BBB (sf) stress multiples, resulting in the BBB (high) (sf) rating.

DBRS’s partial commingling policy for revolving asset pools has been incorporated for all of the Notes issued by the Trust. 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:
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.

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.