DBRS Confirms Ratings of Canadian Credit Card Trust II

DBRS Limited (DBRS) confirmed the ratings of the following outstanding notes (the Notes) issued by Canadian Credit Card Trust II as part of DBRS’s continued effort to provide timely credit rating opinions and increased transparency to market participants:

-- AAA (sf) for the Credit Card Receivables-Backed Class A Notes, Series 2015-1 (the Class A Notes, Series 2015-1)
-- A (sf) for the Credit Card Receivables-Backed Class B Notes, Series 2015-1 (the Class B Notes, Series 2015-1)
-- BBB (sf) for the Credit Card Receivables-Backed Class C Notes, Series 2015-1 (the Class C Notes, Series 2015-1)
-- AAA (sf) for the Credit Card Receivables-Backed Floating Rate Class A Notes, Series 2016-1 (the Class A Notes, Series 2016-1)
-- A (sf) for the Credit Card Receivables-Backed Class B Notes, Series 2016-1 (the Class B Notes, Series 2016-1)
-- BBB (sf) for the Credit Card Receivables-Backed Class C Notes, Series 2016-1 (the Class C Notes, Series 2016-1)

The rating confirmations are based on the following factors:

(1) For the Class A Notes, Series 2015-1 and Class A Notes, Series 2016-1, credit enhancement is available through subordination of 5.75% and 7.75%, respectively; excess spread; and series-specific cash collateral accounts, which could build up to 5.0% of the initial invested amount.

(2) For the Class B Notes, Series 2015-1 and Class B Notes, Series 2016-1, credit enhancement is available through subordination of 2.75% and 3.75%, respectively; excess spread; and series-specific cash collateral accounts.

(3) For the Class C Notes, Series 2015-1 and Class C Notes, Series 2016-1, credit enhancement is available through excess spread and series-specific cash collateral accounts.

(4) Over the past year, three-month average payment rates have continued to increase to 45.7% as at February 2018 from 43.1% as at February 2017. Average annual gross yield also remained strong over the same period, averaging 24.9%, while the net loss level has declined slightly by 6 basis points to 3.63%.

(5) The portfolio is composed of certain credit cards originated, managed and designated by the National Bank of Canada (rated AA (low) and R-1 (middle) with Stable trends by DBRS).

The portfolio is largely concentrated in Québec and has been more insulated from competition than the rest of Canada; however, there is considerably more geographic and regional economic risk stemming from the portfolio’s concentration.

The performance and characteristics of the trust pool and the Notes are available and updated each month in the “Monthly Canadian ABS Report.” DBRS conducts monthly stress testing of each rated class of the Notes, and the results indicate that simultaneous declines in yield and payment rates, as well as 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.

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 Rating Canadian Credit Card and Personal Line of Credit Securitizations, Legal Criteria for Canadian Structured Finance and Master Canadian Structured Finance Surveillance, which are available 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.