DBRS Finalizes Ratings of AAA (sf) and BBB (high) (sf) on Golden Credit Card Trust Series 2014-1, Series 2014-2

DBRS has today finalized the provisional ratings on the Credit Card Receivables-Backed Notes, Series 2014-1 and Series 2014-2 (collectively, the Notes) issued by Golden Credit Card Trust (the Trust) as follows:

-- AAA (sf) on the Credit Card Receivables-Backed Senior Floating Rate Notes, Series 2014-1
-- AAA (sf) on the Credit Card Receivables-Backed Senior Floating Rate Notes, Series 2014-2 (collectively with Series 2014-1, the Senior Notes)
-- BBB (high) (sf) on the Credit Card Receivables-Backed Subordinated Notes, Series 2014-1
-- BBB (high) (sf) on the Credit Card Receivables-Backed Subordinated Notes, Series 2014-2 (collectively with Series 2014-1, the Subordinated Notes)

The Senior Notes and Subordinated Notes are denominated in U.S. dollars and Canadian dollars, respectively. Cross-currency interest rate swaps are in place for the Senior Notes.

Series 2014-1 and Series 2014-2 have an Expected Final Payment Date of March 15, 2017, and March 15, 2019, respectively.

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% of the initial invested amount.

(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, three-month average payment rates have stayed around 45%. 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 decreased and stood at 2.0% as of February 2014. In addition, the inclusion of interchange in October 2009 increased gross yield available to the Trust, which mitigated the elevated loss rates during the recent recession 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, one of the largest financial institutions 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.

Notes:
The applicable methodologies are DBRS Criteria for Canadian Credit Card Securitization (November 2013), Legal Criteria for Canadian Structured Finance (September 2013) and Derivatives 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.