DBRS Finalizes Provisional Ratings of AAA (sf) and A (sf) on Glacier Credit Card Trust Series 2015-1

DBRS Limited (DBRS) has today finalized the provisional ratings on the Credit Card Asset-Backed Notes, Series 2015-1 issued by Glacier Credit Card Trust (the Trust) as follows:

-- AAA (sf) on the Credit Card Asset-Backed Senior Notes, Series 2015-1 (the Senior Notes)
-- A (sf) on the Credit Card Asset-Backed Subordinated Notes, Series 2015-1 (the Subordinated Notes; together with the Senior Notes, the Notes)

The Notes have an Expected Repayment Date of September 20, 2020.

The ratings are based on the following factors:

(1) For the Senior Notes, credit enhancement is available through (a) subordination, providing preferential access to cash flows relative to the Subordinated Notes (7.0% of the initial invested amount); (b) overcollateralization (the Enhancement Amount), which consists of entitlement to additional receivables and is dynamic (generally 5.5% of the unadjusted invested amount); and (c) excess spread.

(2) For the Subordinated Notes, credit enhancement is available through (a) the Enhancement Amount (generally 5.5% of the unadjusted invested amount) and (b) excess spread.

(3) Over the past three years, three-month average payment rates remained stable at about 23%. Three-month average loss rates have decreased to 6.1% as of April 2015 from a peak of 8.3% in August 2009; however, they are still among the highest in Canada. This is mitigated by improving late-stage delinquencies (more than 90 days delinquent) and appropriately sized credit enhancement levels. A higher yield since 2008 also helped to mitigate the impact of the higher loss rates.

(4) The custodial pool is a well-diversified and seasoned portfolio. The number of accounts in the selected pool exceeded 3.9 million after the account addition on June 15, 2015.

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

While DBRS’s Legal Criteria for Canadian Structured Finance expects collections to be remitted to a Trust account within two business days if the Servicer is no longer rated investment grade, DBRS notes that the transaction documents allow partial commingling to continue as long as Canadian Tire Bank is the Servicer. Should Canadian Tire Corporation, Limited (rated BBB (high), Stable by DBRS) be downgraded below investment grade and a Servicer Termination Event occurs, subject to certain conditions (please refer to corresponding rating report), 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.

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

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.