DBRS Confirms the Ratings of SCORE Trust

DBRS has today confirmed all the ratings of the outstanding notes (the Notes) issued by SCORE Trust (the Trust). The confirmation is part of DBRS’s continued effort to provide timely credit rating opinions and increased transparency to market participants:

-- AAA (sf) for Credit Card Receivables-Backed Senior Notes, Series 2004-1 (the Senior Notes)
-- A (high) (sf) for Credit Card Receivables-Backed Subordinated Notes, Series 2004-1 (the Subordinated Notes)

The rating confirmation is based on the following factors:

(1) For the Senior Notes, credit enhancement is available through subordination of 6%, a cash reserve account and excess spread. The cash reserve account is currently at 3.75% and could increase up to 6% if the three-month average excess spread falls below 3.75%.

(2) For the Subordinated Notes, credit enhancement is available through excess spread and the cash reserve account.

(3) While the portfolio yield has been in decline since the peak in late 2011 as a result of an increase in deferred receivables held, excess spread remained stable, in the range of 7% to 9%. The loss rate has also steadily declined since 2009.

(4) The custodial pool is a well-diversified and seasoned portfolio, composed of certain credit card accounts managed and designated by JPMorgan Chase Bank, N.A. (Chase; rated AA (low) and R-1 (middle) with a Stable trend by DBRS). The credit cards are originated and accepted in the stores of Sears Canada, subject to the agreements between Sears Canada and Chase.

The Trust participates in a co-ownership structure, which means the proceeds from the 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. Chase, 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 finance charges, cash advance fees, annual fees and principal amounts billed to cardholders. The Retained Interest is at least 12%.

As the accounts are sold on a fully serviced basis, no servicing fee will be paid as long as Chase remains as the servicer. The servicer does not commingle collections and is required to deposit collections into the collection account within two business days of processing.

Notwithstanding the stated targeted principal distribution date of the Notes, certain events may result in early repayment or delays. Such events are called amortization events. Following the occurrence of a series amortization event, collections allocable to the series will be directed first to pay Trust expenses and interest on the Notes and then to repay outstanding principal of the Senior Notes until nil. Principal repayments of the Subordinated Notes will be made only after the senior notes have been repaid in full. Essentially, this provides the Senior Notes preferential access to the cash flows generated from the receivables for principal repayments, in an amount equal to the subordination available for the Senior Notes.

The accounts in the custodial pool are originated and managed by Chase, 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 Chase, as seller, to ensure consistent credit quality of the custodial pool.

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 (see the link under Related Research to the right of the screen). 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:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are 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 (April 2011), Legal Criteria for Canadian Structured Finance (September 2012) and Canadian Structured Finance Surveillance (March 2012), which are available on our website under Methodologies.