DBRS Confirms Ratings of Master Credit Card Trust II

DBRS Limited (DBRS) confirmed the ratings of all the outstanding notes (the Notes) issued by Master Credit Card Trust II (MCCT II or the Trust). 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 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 2015-1
-- AA (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2015-1
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2015-1
-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2016-2
-- AA (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2016-2
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2016-2
-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2017-2
-- AA (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2017-2
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2017-2

The rating confirmation is based on the following factors:

(1) For the AAA (sf)-rated notes, credit enhancement is available through subordination of at least 5.5% (for fixed-rate notes), in addition to excess spread, which is currently above 19.7% for all series, and series-specific cash accounts. The series-specific cash accounts could build up to 5.0% 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 25.0% as of August 2016 to 25.6% as of August 2017. Likewise, the 12-month average principal payment rate has increased from 46.4% to 48.6% 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 3.2% as at the end of August 2017.

(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 Negative 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 principal methodologies are Master Canadian Structured Finance Surveillance Methodology, Rating Canadian Credit Card and Personal Line of Credit Securitizations, Derivatives Criteria for Canadian Structured Finance and Legal Criteria for Canadian Structured Finance, which are available on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.