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

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

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

Series 2018-1 has a Targeted Principal Distribution Date of July 17, 2023.

The ratings are based on the following factors:

(1) For the Class A Notes, credit enhancement is available through subordination of 7.0%, providing preferential access to cash flows relative to the Class B Notes and Class C Notes, excess spread and the Reserve Account, which could build up to 5% of the Invested Amount.

(2) For the Class B Notes, credit enhancement is available through subordination of 3.5%, providing preferential access to cash flows relative to the Class C Notes, excess spread and the Reserve Account.

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

(4) Payment rates and gross yield are among the highest in Canada. Over the past three years, payment rates have averaged above 50%, while gross yield has averaged 25%. While the three-month average loss rate increased to a peak of 7.0% in May 2009 from 3.6% (the low in 2008), it has since declined to 3.4% as of May 31, 2018, similar to the levels experienced prior to 2009.

(5) The custodial pool is a well-diversified portfolio.

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 notes that the transaction documents do not require the remittance of collections into a Trust account within two business days when the Performance Guarantor is no longer rated investment grade, as expected in DBRS’s “Legal Criteria for Canadian Structured Finance.” Should the Performance Guarantor be downgraded below investment grade, DBRS will assess the impact of partial commingling at that time and take appropriate rating action. If the Performance Guarantor is downgraded below BB, all collections allocable to the Noteholders will be remitted to a Trust account within two business days.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodologies are Rating Canadian Credit Card and Personal Line of Credit Securitizations (November 2017) and Legal Criteria for Canadian Structured Finance (July 2018), which are available on dbrs.com 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 under Related Documents or by contacting us at info@dbrs.com.

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 at the right of the screen or by contacting us at info@dbrs.com.