DBRS Confirms Ratings of CARDS II Trust

DBRS Limited (DBRS) confirmed the ratings of all the outstanding notes (the Notes) issued by CARDS II Trust (the Trust), as listed below. The confirmations are part of DBRS’s continued efforts to provide timely credit rating opinions and increased transparency to market participants.

-- Credit Card Receivables-Backed Class A Notes, Series 2015-3 at AAA (sf) (Class A Series 2015-3)
-- Credit Card Receivables-Backed Class B Notes, Series 2015-3 at BBB (sf) (Class B Series 2015-3; together, with Class A Series 2015-3, Series 2015-3)

-- Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2017-1 at AAA (sf) (Class A Series 2017-1)
-- Credit Card Receivables-Backed Class B Floating Rate Notes, Series 2017-1 at BBB (sf) (Class B Series 2017-1; together, with Class A Series 2017-1, Series 2017-1)

-- Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2017-2 at AAA (sf) (Class A Series 2017-2)
-- Credit Card Receivables-Backed Class B Floating Rate Notes, Series 2017-2 at BBB (sf) (Class B Series 2017-2; together, with Class A Series 2017-2, Series 2017-2)

-- Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2018-1 at AAA (sf) (Class A Series 2018-1)
-- Credit Card Receivables-Backed Class B Floating Rate Notes, Series 2018-1 at BBB (sf) (Class B Series 2018-1; together, with Class A Series 2018-1, Series 2018-1)

-- Credit Card Receivables-Backed Class A Fixed Rate Notes, Series 2018-2 at AAA (sf) (Class A Series 2018-2)
-- Credit Card Receivables-Backed Class B Fixed Rate Notes, Series 2018-2 at BBB (sf) (Class B Series 2018-2; together, with Class A Series 2018, Series 2018-2)

The rating confirmations are based on the following factors:

(1) For the AAA-rated Class A Notes, credit enhancement is available through subordination, excess spread (currently in the range of 14.6% to 15.7% as at June 2018) and series-specific cash reserve accounts that could build up to 5.0% of the initial invested amount if the three-month average excess spread falls to or below 1.5%. The AAA-rated Class A Notes benefit from the subordination offered by the Class B Notes, which is equivalent to 6.50% for Series 2015-3 and 7.25% for Series 2017-1, Series 2017-2, Series 2018-1 and Series 2018-2. While the Series 2017-1, Series 2017-2 and Series 2018-1 Class A Notes are denominated in U.S. dollars with floating rate coupons, they have a cross-currency interest rate swap in place that converts the obligation to a Canadian-dollar fixed rate. The Class A Series 2018-2 Notes are denominated in U.S. dollars with fixed-rate coupons and has a cross-currency swap in place to convert the obligation to Canadian dollars.

(2) For the BBB-rated Class B Notes, credit enhancement is available through excess spread and series-specific cash reserve accounts that could build up to 5.0% of the initial invested amount if the three-month average excess spread falls to or below 1.5%.

(3) Over the past year, the average payment rate has remained stable, increasing slightly to 37.3% on average from 37.0% in the prior year. Average annual gross yield also remained strong over the past year, averaging 22.4%, while the average net loss level has improved slightly by 20 basis points year over year to 3.2%.

(4) The Canadian Imperial Bank of Commerce (Long-Term Issuer Rating of AA with a Stable trend by DBRS) is experienced in managing one of the largest credit card portfolios in Canada.

The performance and characteristics of the custodial pool and the Notes are available and updated each month in the Monthly Canadian ABS Report. DBRS conducts a monthly stress testing of each rated class of the Trust, with the result indicating 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.

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 2018), Derivatives Criteria for Canadian Structured Finance (July 2018) and Master Canadian Structured Finance Surveillance Methodology (May 2018), which are available on dbrs.com under Methodologies.

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

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