DBRS Finalizes Ratings of AAA (sf) and BBB (high) (sf) on Golden Credit Card Trust, Series 2012-3 and Series 2012-4

DBRS has today finalized the provisional ratings on the Credit Card Receivables-Backed Notes, Series 2012-3 and Series 2012-4 (collectively, the Notes) issued by Golden Credit Card Trust (the Trust) as follows:

– AAA (sf) for the Credit Card Receivables-Backed Senior Floating-Rate Notes, Series 2012-3
– AAA (sf) for the Credit Card Receivables-Backed Senior Notes, Series 2012-4 (collectively, with Series 2012-3, the Senior Notes)
– BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2012-3
– BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2012-4 (collectively, with Series 2012-3, the Subordinated Notes)

Series 2012-3 and Series 2012-4 have an Expected Final Payment Date of July 15, 2015, and July 17, 2017, respectively.

The Senior Notes and Subordinated Notes are denominated in U.S. dollars and Canadian dollars, respectively. A cross-currency interest rate swap is in place for the Series 2012-3 Senior Notes and a cross-currency swap is in place for the Series 2012-4 Senior Notes.

The ratings are based on the following factors:

(1) For the Senior Notes, credit enhancement is 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 is 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 stayed around 41%. 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 2.7% as of June 2012. 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 (RBC), 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.

As the accounts are sold on a fully serviced basis, no servicing fee will be paid to RBC as long as RBC remains the servicer. RBC may remit collections 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 collections 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 participates in a co-ownership structure, all series of notes issued by the Trust 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. 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 rated notes of the Trust:

-- AAA (sf) for the Credit Card Receivables-Backed Senior Notes, Series 2008-2
-- BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2008-2
-- AAA (sf) for the Credit Card Receivables-Backed Senior Notes, Series 2010-1
-- BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2010-1
-- AAA (sf) for the Credit Card Receivables-Backed Floating Rate Senior Notes, Series 2010-2
-- BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2010-2
-- AAA (sf) for the Credit Card Receivables-Backed Senior Notes, Series 2011-1
-- BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2011-1
-- AAA (sf) for the Credit Card Receivables-Backed Senior Floating Rate Notes, Series 2011-2
-- BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2011-2
-- AAA (sf) for the Credit Card Receivables-Backed Senior Floating Rate Notes, Series 2012-1
-- BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2012-1
-- AAA (sf) for the Credit Card Receivables-Backed Senior Notes, Series 2012-2
-- BBB (high) (sf) for the Credit Card Receivables-Backed Subordinated Notes, Series 2012-2

Notes:
The applicable methodologies are DBRS Criteria for Canadian Credit Card Securitization (April 2011), Legal Criteria for Canadian Structured Finance (November 2010) and Swap Criteria for Canadian Structured Finance Transactions (November 2010), 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.