DBRS Assigns Prov. Ratings of AAA (sf), A (sf), BBB (sf) to Eagle Credit Card Trust, Series 2013-1

DBRS has today assigned provisional ratings to the Credit Card Receivables-Backed Notes, Series 2013-1 to be issued by Eagle Credit Card Trust (the Trust) as follows:

-- AAA (sf) to the Credit Card Receivables-Backed Class A Notes, Series 2013-1 (the Class A Notes)
-- A (sf) to the Credit Card Receivables-Backed Class B Notes, Series 2013-1 (the Class B Notes)
-- BBB (sf) to the Credit Card Receivables-Backed Class C Notes, Series 2013-1 (the Class C Notes; collectively with the Class A Notes and Class B Notes, the Notes).

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

The ratings are based on the following factors:

(1) For the Class A Notes, credit enhancement is available through subordination of 7.0%, providing preferential access to cash flows relative to the Class B Notes and Class C Notes, excess spread and the Reserve Account, which could build up to 5% of the Invested Amount.

(2) For the Class B Notes, credit enhancement is available through subordination of 3.5%, providing preferential access to cash flows relative to the Class C Notes, excess spread and the Reserve Account.

(3) For the Class C Notes, credit enhancement is available through excess spread and the Reserve Account.

(4) Payment rates and gross yield are among the highest in Canada. Payment rates have averaged above 50% over the past three years, while three-month average gross yield reached 25.1% as of August 31, 2013. While the three-month average loss rate increased to a peak of 7.0% during the recent recession, it has since declined to 3.6% as of August 31, 2013, and delinquencies have also stabilized.

(5) The custodial pool is a well-diversified portfolio of prime quality obligors.

Stress testing by DBRS 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.

However, DBRS notes that the transaction documents do not require the remittance of collections into a Trust account within two business days when the Performance Guarantor is no longer rated investment grade, as expected in DBRS’s “Legal Criteria for Canadian Structured Finance.” Should the Performance Guarantor be downgraded below investment grade, DBRS will assess the impact of partial commingling at the time and take appropriate rating action. If the Performance Guarantor is downgraded below BB, an Amortization Event will occur and all collections allocable to the Noteholders will be remitted to a Trust account within two business days.

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

The applicable methodologies are DBRS Criteria for Canadian Credit Card Securitization (April 2011) and Legal Criteria for Canadian Structured Finance (September 2013), 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.