DBRS Assigns Ratings of AAA (sf) and BBB (sf) to CARDS II Trust, Series 2013-2

DBRS has today assigned ratings to the Credit Card Receivables-Backed Floating Rate Notes, Series 2013-2 (the Notes), issued by CARDS II Trust (the Trust), as follows:

-- AAA (sf) to the Credit Card Receivables-Backed Floating Rate Class A Notes, Series 2013-2 (the Class A Notes)
-- BBB (sf) to the Credit Card Receivables-Backed Floating Rate Class B Notes, Series 2013-2 (the Class B Notes)

The targeted principal distribution date of the Notes is January 15, 2014.

The ratings are based on the following factors:

(1) For the Class A Notes, credit enhancement is available through subordination of 9.5%, excess spread and the series-specific cash reserve account, which could build up to 5% of the initial invested amount.

(2) For the Class B Notes, credit enhancement is available through excess spread and the series-specific cash reserve account.

(3) Since 2008, three-month average payment rates remained strong at above 35%. While the one-month loss rate peaked at 7.3% in May 2009, loss rates and delinquencies have declined and stabilized, with the three-month average loss rate at 3.9% as of November 2012. The removal of the 2% cap on interchange fees on June 25, 2009, also helped mitigate the impact of the increase in loss rates prior to May 2009 and increased the protection for the investors.

(4) The custodial pool is a well-diversified, seasoned portfolio and is the largest 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.

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.

Notes:
The applicable methodologies are DBRS Criteria for Canadian Credit Card Securitization (April 2011) and Legal Criteria for Canadian Structured Finance (September 2012), 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.

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.