DBRS Finalizes BBB (high) (sf) Rating on Golden Credit Card Trust Series Enhancement Notes, Upgrades Certain Subordinated Notes to A (high) (sf) and Confirms Senior Notes at AAA (sf)

DBRS Limited (DBRS) has today finalized the provisional rating of BBB (high) (sf) on the Credit Card Receivables-Backed Series Enhancement Notes issued by Golden Credit Card Trust (the Trust).

As the Series Enhancement Notes are issued to provide additional credit enhancement and are subordinated to the outstanding notes of the Trust, excluding the Series 2010-1 and Series 2010-2 notes (the Existing Notes), DBRS has upgraded the subordinated class of the Existing Notes to A (high) (sf) from BBB (high) (sf), due to the increase in subordination from zero to 2.09%. The AAA (sf) ratings of the senior class of the Existing Notes were also confirmed with the issuance of the Series Enhancement Notes. DBRS notes that Series 2010-1 and Series 2010-2 are currently in accumulation and will not benefit from the Series Enhancement Notes or any rating upgrade.

The Series Enhancement Notes have an Expected Final Payment Date of March 15, 2019.

The rating is based on the following factors:

(1) Credit enhancement is available through excess spread and the Reserve Account.

(2) 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 47%. At the same time, loss rates remained the lowest in Canada. While the three-month average loss rate peaked at 3.9% as of November 2009, it has since decreased and stood at 2.0% as of October 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.

(3) 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 Series Enhancement Notes on a timely basis. The severity of the tests applied is commensurate with the rating of the Series Enhancement Notes, which are expected to withstand more punitive BBB (sf) stress multiples, resulting in the BBB (high) (sf) rating.

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 Rating Canadian Credit Card and Personal Line of Credit Securitizations (November 2014), Legal Criteria for Canadian Structured Finance (August 2014) and Derivatives Criteria for Canadian Structured Finance (August 2014), which are available on our website under Methodologies.