DBRS Confirms Ratings of Master Credit Card Trust and Master Credit Card Trust II

DBRS has today confirmed the ratings of all the outstanding notes (the Notes) issued by Master Credit Card Trust (MCCT) and Master Credit Card Trust II (MCCT II or the Trust). The notes issued by MCCT were assumed by MCCT II on September 28, 2012. The confirmation is part of DBRS’s continued effort to provide timely credit rating opinions and increased transparency to market participants.

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2011-1
-- BBB (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2011-1

-- AAA (sf) on the Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2011-2
-- BBB (sf) on the Credit Card Receivables-Backed Class B Floating Rate Notes, Series 2011-2

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2012-1
-- BBB (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2012-1

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2012-2
-- AA (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2012-2
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2012-2

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2013-2
-- AA (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2013-2
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2013-2

-- AAA (sf) on the Credit Card Receivables-Backed Floating Rate Class A Notes, Series 2013-3
-- AA (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2013-3
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2013-3

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2013-4
-- AA (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2013-4
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2013-4

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2014-1
-- AA (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2014-1
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2014-1

The rating confirmation is based on the following factors:

(1) For the AAA (sf)-rated notes, credit enhancement is available through subordination of 8.5% (for Series 2011-2 floating-rate notes), or at least 5.5% (for fixed-rate notes and Series 2013-3 floating rate notes, which have a cross-currency, interest rate swap), in addition to excess spread, which is currently above 17% for all series, and series-specific cash accounts. The series-specific cash accounts could build up to 5% of the initial or Maximum Allocated Amount, as applicable.

(2) For the AA (sf)-rated notes, credit enhancement is available through subordination of at least 3.5%, in addition to excess spread and the series-specific cash accounts.

(3) For the BBB (sf)-rated notes, credit enhancement is available through excess spread and the series-specific cash accounts.

(4) Over the past two years, the gross yield and principal payment rate have been strong and showing increasing trends. The 12-month average gross yield has increased slightly from 22.9% as of August 2013 to 23.6% as of August 31, 2014. Likewise, the 12-month average principal payment rate has also improved from 40.8% to 41.5% in the same period. The one-month loss rate, after reaching a peak of 5.6% in February 2010, has been gradually decreasing and is among one of the lowest in Canada at 2.6% as at the end of August 2014.

(5) The Trust pool is a well-diversified and seasoned portfolio composed of certain MasterCard credit card accounts originated, managed and designated by Bank of Montreal (BMO). BMO is the fourth-largest bank in Canada by assets and is rated AA and R-1 (high) with Stable trends by DBRS.

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 on 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 to repay the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of the Notes.

For more detailed information on the transaction structure, please refer to the rating reports of the Trust at www.dbrs.com.

Notes:
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 Canadian Structured Finance Surveillance Methodology, DBRS Criteria for Canadian Credit Card Securitization, Derivatives Criteria for Canadian Structured Finance and Legal Criteria for Canadian Structured Finance, which are available on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.