DBRS Morningstar Confirms Ratings of CARDS II Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings of all outstanding notes (the Notes) issued by CARDS II Trust (the Trust), as listed below. The confirmations are part of DBRS Morningstar’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 (Class A Series 2015-3) at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2015-3 (Class B Series 2015-3 and together with Class A Series 2015-3, Series 2015-3) at BBB (sf)

-- Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2019-1 (Class A Series 2019-1) at AAA (sf)
-- Credit Card Receivables-Backed Class B Floating Rate Notes, Series 2019-1 (Class B Series 2019-1) at A (sf)
-- Credit Card Receivables-Backed Class C Floating Rate Notes, Series 2019-1 (Class C Series 2019-1 and together with Class A Series 2019-1 and Class B Series 2019-1, Series 2019-1) at BBB (sf)

-- Credit Card Receivables-Backed Class A Notes, Series 2019-2 (Class A Series 2019-2) at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2019-2 (Class B Series 2019-2) at A (sf)
-- Credit Card Receivables-Backed Class C Notes, Series 2019-2 (Class C Series 2019-2 and together with Class A Series 2019-2 and Class B Series 2019-2, Series 2019-2) at BBB (sf)

DBRS Morningstar initially published its outlook on the Coronavirus Disease (COVID-19) pandemic’s impact on key economic indicators for the 2020–22 time frame in April 2020. DBRS Morningstar last updated the macroeconomic scenarios on July 22, 2020, in its “Global Macroeconomic Scenarios: July Update” at https://www.dbrsmorningstar.com/research/364318/global-macroeconomic-scenarios-july-update. For the rated Notes, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis. The rating confirmations are based on the following factors, each of which includes additional analysis and, where appropriate, additional stresses to expected performance as a result of global efforts to contain the spread of the coronavirus pandemic:

(1) The Notes benefit from excess spread, which has been in the range of 12.3% to 16.5% over the last 12 months, 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%.

(2) The AAA (sf)–rated Class A notes benefit from subordination equivalent to 6.50% for Series 2015-3 and 7.25% for Series 2019-1 and Series 2019-2. The A (sf)–rated Class B Series 2019-1 and Class B Series 2019-2 notes benefit from subordination of 2.50%.

(3) While the Series 2019-1 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.

(4) Payment deferrals were offered to customers affected by the coronavirus pandemic. Average payment rates declined slightly in Q2 2020 to 35.5% from 38.9% in the 12 months up to March 2020. Partial interest rate relief offered to some customers during the deferral period combined with lower card usage contributed to a slightly lower gross yield of 20.6% in Q2 2020 compared with 22.7% in the 12 months up to March 2020.

(5) Net losses remained stable and averaged 3.1% over the last 12 months.

(6) The Canadian Imperial Bank of Commerce (rated AA with a Stable trend by DBRS Morningstar) 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 DBRS Morningstar’s Monthly Canadian ABS Report. DBRS Morningstar conducts a monthly stress testing of each rated class of the Trust, with the results 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.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

The principal methodology is Master Canadian Structured Finance Surveillance Methodology (June 28, 2019),
which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 [email protected].

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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