DBRS Morningstar Finalizes Provisional Ratings of AAA (sf), A (high) (sf) and BBB (high) (sf) on Golden Credit Card Trust, Series 2019-2

DBRS Limited (DBRS Morningstar) finalized the following provisional ratings on the Credit Card Receivables-Backed Notes, Series 2019-2 (the Notes) issued by Golden Credit Card Trust (the Trust):

-- AAA (sf) on the Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2019-2 (the Class A Notes)
-- A (high) (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2019-2 (the Class B Notes)
-- BBB (high) (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2019-2 (the Class C Notes)

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

Series 2019-2 has an Expected Final Payment Date of October 15, 2021.

The ratings are based on the following factors:

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

(3) For the Class C Notes, CE 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 during 2009. Over the past two years, three-month average payment rates have averaged around 50% with gross yields ranging between 21% and 25% after the inclusion of interchange. The three-month average loss rate was 2.5% as of September 30, 2019, and remains one of the lowest loss rates of any Canadian issuer of credit card receivables-backed notes.

(5) The receivables pool is a well-diversified and seasoned portfolio, originated and managed by the Royal Bank of Canada (rated AA (high) with a Stable trend by DBRS Morningstar), one of the largest financial institutions in Canada as measured by assets.

DBRS Morningstar stress testing indicates that simultaneous declines in yield and payment rates and increases in losses would not result in the Trust’s failure to repay the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of the Notes.

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

Notes:
The principal methodology is Rating Canadian Credit Card and Personal Line of Credit Securitizations (November 2018), which can be found on dbrs.com under Methodologies & Criteria.

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 Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

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.

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

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