DBRS Confirms Ratings of Glacier Credit Card Trust

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

-- R-1 (high) (sf) for Asset-Backed Commercial Paper, Series 1997-1

-- AAA (sf) for Asset-Backed Senior Notes, Series 2006-2
-- A (sf) for Asset-Backed Subordinated Notes, Series 2006-2

-- AAA (sf) for Credit Card Asset-Backed Senior Notes, Series 2010-1
-- A (sf) for Credit Card Asset-Backed Subordinated Notes, Series 2010-1

-- AAA (sf) for Credit Card Asset-Backed Senior Notes, Series 2012-1
-- A (sf) for Credit Card Asset-Backed Subordinated Notes, Series 2012-1

-- AAA (sf) for Credit Card Asset-Backed Senior Notes, Series 2012-2
-- A (sf) for Credit Card Asset-Backed Subordinated Notes, Series 2012-2

The rating confirmation is based on the following factors:

(1) For the AAA-rated notes, credit protection is provided by subordination (5.5% of the initial invested amount), overcollateralization (the Enhancement Amount), which is dynamic and generally 5.5% of the unadjusted invested amount, and excess spread generated from the receivables.

(2) For R-1 (high)-rated notes, credit protection is provided by the Enhancement Amount, which is dynamic and generally 11.5% of the unadjusted invested amount, and excess spread generated from the receivables.

(3) For the A-rated subordinated notes, credit protection is provided by the Enhancement Amount, which is dynamic and generally 5.5% of the unadjusted invested amount, and excess spread generated from the receivables.

(4) Payment rates have remained relatively stable, currently at 23.1% as of August 31, 2013. The gross yield has been slightly higher since the recent recession, reaching 21.0% at the end of August 2013. Annualized loss rate has also been decreasing gradually since 2009.

(5) The custodial pool is a well-diversified and seasoned portfolio.

The Trust participates in a co-ownership structure, which means the proceeds from each series of 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. Canadian Tire Bank (CTB), 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 interest charges, monthly fees, administrative fees, interchange fees, late charges, recoveries and principal amounts billed to cardholders. The Retained Interest is at least 7% for the Notes.

As the accounts are sold on a fully serviced basis, no servicing fee will be paid as long as CTB or an affiliate of Canadian Tire Corporation, Limited (CTC) remains as the servicer. The servicer shall remit collections as required to the Collection Account on the business day prior to the relevant payment date, with no obligation to segregate the collections with respect to the receivables, provided that CTC maintains a minimum short-term rating of R-1 (low) by DBRS. As CTC currently has a short-term rating of R-2 (high) from DBRS and does not meet the minimum rating threshold, CTB is only allowed to commingle the amount in excess of what is required to be paid or deposited for the next distribution date (partial commingling), as outlined in the DBRS “Legal Criteria for Canadian Structured Finance” (DBRS Legal Criteria, see Related Research below). 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.

DBRS's Legal Criteria also expects collections to be remitted to a Trust account within two business days if the servicer is no longer rated investment grade. However, DBRS notes that the transaction documents allow partial commingling to continue as long as CTB is the servicer. Should CTC be downgraded below investment grade and a Servicer Termination Event occurs, subject to certain conditions, collections will be remitted within two business days. If a Servicer Termination Event does not occur, DBRS will assess the impact of partial commingling at the time and take the appropriate rating action.

Notwithstanding the stated expected repayment dates of the Notes, certain events may result in early repayment or delays of one or more series. Such events are called amortization events. Following the occurrence of a series amortization event, collections allocable to a series will be directed first to pay Trust expenses, second to repay all accrued and unpaid interest on the series senior and subordinated notes sequentially, and third to repay the outstanding principal of the senior notes until it is zero, followed by principal repayments of the subordinated notes until it is zero. Essentially, this provides the more 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 class of notes.

The accounts in the custodial pool are originated and managed by CTB, 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 CTB, as seller, to ensure consistent credit quality of the custodial pool. CTB is an indirect, wholly owned subsidiary of CTC, one of the largest retailers in Canada.

As the Trust participates in a co-ownership structure, all series of Notes 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. However, these requirements may be series-specific. 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 Trust pool and the Notes are available and updated each month in the Monthly Canadian ABS Report (see Related Research below). 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 to repay the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of the Notes.

This press release, originally published on October 29, 2013, was revised on November 27, 2013, with clarification on the Enhancement Amount and disclosure of an exception to DBRS criteria.

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, Legal Criteria for Canadian Structured Finance and Canadian Structured Finance Surveillance, which are available on our website under Methodologies.