DBRS Assigns Provisional Ratings of AAA (sf) and A (sf) to Glacier Credit Card Trust Series 2018-1

DBRS Limited (DBRS) assigned provisional ratings to the following notes to be issued by Glacier Credit Card Trust (the Trust):

-- AAA (sf) to the Credit Card Asset-Backed Senior Notes, Series 2018-1 (the Senior Notes)
-- A (sf) to the Credit Card Asset-Backed Subordinated Notes, Series 2018-1 (the Subordinated Notes; together, with the Senior Notes, the Notes)

Finalization of the ratings is contingent upon receipt of final documents conforming to information already received by DBRS.

The ratings are based on the following factors:

(1) For the Senior Notes, credit enhancement will be available through (a) subordination, providing preferential access to cash flows relative to the Subordinated Notes (6.5% of the initial invested amount); (b) overcollateralization (the Enhancement Amount), which consists of entitlement to additional receivables and is dynamic (generally 5.5% of the unadjusted invested amount); and (c) excess spread.

(2) For the Subordinated Notes, credit enhancement will be available through (a) the Enhancement Amount (generally 5.5% of the unadjusted invested amount) and (b) excess spread.

(3) Over the past three years, three-month average payment rates remained stable at about 25%. Three-month average loss rates have decreased to 5.2% as of June 2018 from a peak of 8.3% in August 2009; however, they are still among the highest in Canada. This is mitigated by improved and stabilized late-stage delinquencies (more than 90 days delinquent) and appropriately sized credit enhancement levels. A higher yield since 2008 also helped to mitigate the impact of the higher loss rates.

(4) The custodial pool is a well-diversified and seasoned portfolio. The number of accounts in the selected pool exceeded 3.3 million as of June 30, 2018.

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 to repay the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of the Notes.

While DBRS’s “Legal Criteria for Canadian Structured Finance” expects collections to be remitted to a Trust account within two business days if the Servicer is no longer rated investment grade, DBRS notes that the transaction documents allow partial commingling to continue as long as Canadian Tire Bank is the Servicer. If Canadian Tire Corporation, Limited (rated BBB (high) with a Stable trend by DBRS) is downgraded to below investment grade and a Servicer Termination Event occurs, subject to certain conditions (please refer to the corresponding presale report), collections will be remitted within two business days. If a Servicer Termination Event does not occur, DBRS will assess the impact of partial commingling at the time and take appropriate rating action.

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

DBRS also notes that a true sale opinion in respect of the co-ownership interests in any new accounts that may be added will not be delivered in connection with each account addition, as expected in DBRS’s “Legal Criteria for Canadian Structured Finance.” DBRS considers the risk minimal as additional accounts are transferred to the Custodian infrequently, an Officer’s Certificate is provided by the Seller in connection with each additional account transfer and a true sale opinion in respect of the co-ownership interests in any new accounts that may be added will be delivered every six months for any additions made within the previous six months.

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) and Legal Criteria for Canadian Structured Finance (July 2018), which can be found on dbrs.com under Methodologies.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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.

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