DBRS Assigns Provisional Ratings of AAA (sf) and BBB (sf) to Trillium Credit Card Trust II, Series 2016-1

DBRS Limited (DBRS) has today assigned the following provisional ratings to the Credit Card Receivables-Backed Notes, Series 2016-1 (the Notes) to be issued by Trillium Credit Card Trust II (the Trust).

-- AAA (sf) to the Credit Card Receivables-Backed Floating Rate Class A Notes, Series 2016-1
-- BBB (sf) to the Credit Card Receivables-Backed Class B Notes, Series 2016-1

The Class A Notes are denominated in U.S. dollars while the Class B Notes are in Canadian dollars. A cross-currency, interest rate swap is in place for the Class A Notes.

The finalization of the rating is contingent upon receipt of final documents conforming to information already received.

The ratings are based on the following factors:

(1) For the Class A Notes, credit enhancement will be provided by subordination of 8%, excess spread and the Cash Reserve Account, which will be zero at closing but could build up to 5% of the Initial Invested Amount if excess spread is compressed below stated levels.

(2) For the Class B Notes, credit enhancement will be provided by excess spread and the Cash Reserve Account.

(3) Since 2010, payment rates and gross yields have remained strong, averaging 41% and 21%, respectively. Three-month average loss rates have increased over the past few years, to 4.1% in February 2016 from 2.5% in October 2013. This is mitigated by high payment rates, stable gross yields and appropriately sized credit enhancement levels.

(3) The custodial pool is a large, well-diversified portfolio, originated and managed by Scotiabank.

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.

Notes:
The applicable methodologies are Rating Canadian Credit Card and Personal Line of Credit Securitizations (November 2015), Legal Criteria for Canadian Structured Finance (August 2015) and Derivatives Criteria for Canadian Structured Finance (August 2015), which are available on our website under Methodologies.

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 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.