DBRS Finalizes Provisional Ratings of AAA (sf), A (high) (sf) and BBB (high) (sf) on Golden Credit Card Trust, Series 2018-1

DBRS Limited (DBRS) finalized its provisional ratings on the following Credit Card Receivables-Backed Notes, Series 2018-1 (the Notes) issued by Golden Credit Card Trust (the Trust):

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2018-1
-- A (high) (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2018-1
-- BBB (high) (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2018-1

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

Series 2018-1 has an Expected Final Payment Date of January 15, 2021.

The ratings are based on the following factors:

(1) For the Class A Notes, credit enhancement is available through subordination of 6.5%, excess spread and the Series Reserve Account, which could build up to 5.0% of the initial invested amount.

(2) For the Class B Notes, credit enhancement is available through subordination of 2.0%, excess spread and the Series Reserve Account.

(3) For the Class C Notes, credit enhancement is available through excess spread and the Series Reserve Account.

(4) The performance of the Trust’s portfolio has been strong since inception and demonstrated resilience throughout the economic downturn over 2009. Over the past two years, three-month average payment rates have averaged around 49%, with gross yields ranging between 20% and 25% after the inclusion of interchange. The three-month average loss rate stood at 2.1% as at December 31, 2017, and though it has fluctuated between 2.0% and 2.7% over the past two years because of weaker performance in Alberta, the Trust still has the lowest loss rate of any Canadian issuer of credit card receivables-backed notes.

(5) The custodial pool is a well-diversified and seasoned portfolio, originated and managed by Royal Bank of Canada, one of the largest financial institutions in Canada as measured by assets.

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.

DBRS’s analysis also indicates that the Class B Notes and Class C Notes are expected to withstand more punitive stress multiples for requested rating categories, warranting a (high) designation and resulting in A (high) (sf) and BBB (high) (sf) ratings, respectively.

DBRS notes that there is no cap on indemnity amounts payable to service providers in the payment waterfalls as expected in DBRS’s “Legal Criteria for Canadian Structured Finance” methodology. Should the indemnity be above a reasonable amount, DBRS will assess the impact of uncapped cash outflow at the time and take appropriate rating action.

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 under Related Documents or by contacting us at info@dbrs.com.

The principal methodologies are Rating Canadian Credit Card and Personal Line of Credit Securitizations (November 2017), Legal Criteria for Canadian Structured Finance (July 2017) and Derivatives Criteria for Canadian Structured Finance (July 2017), which can be found on dbrs.com under Methodologies.

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

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