DBRS Morningstar Finalizes Provisional Ratings of AAA (sf), A (high) (sf) and BBB (high) (sf) on Golden Credit Card Trust, Series 2021-1

DBRS Limited (DBRS Morningstar) finalized its provisional ratings on the Credit Card Receivables-Backed Notes, Series 2021-1 (the Notes) issued by Golden Credit Card Trust (the Trust) as follows:

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2021-1 (the Class A Notes)
-- A (high) (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2021-1 (the Class B Notes)
-- BBB (high) (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2021-1 (the Class C Notes)

The Notes are denominated in U.S. dollars. Cross-currency swaps are in place for the Notes.

Series 2021-1 has an Expected Final Payment Date of August 17, 2026.

On June 18, 2021, the DBRS Morningstar Sovereigns group published its updated outlook on the impact of the Coronavirus Disease (COVID-19) on key economic indicators for the 2021–22 time frame. The initial outlook was published on April 16, 2020, and has been updated periodically since. For details see https://www.dbrsmorningstar.com/research/380281. The uncertainty of the pandemic’s continued impact in Canada on unemployment and the timing and pace of economic recovery coupled with the eventual elimination of government support may affect the performance of the portfolio over time, including increases in delinquencies and losses. For the ratings assigned, DBRS Morningstar considered implications of DBRS Morningstar Sovereigns group's moderate economic scenario in developing its base case net loss rate, yield and payment rate assumptions.

DBRS Morningstar considered the following factors in its analysis:

(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) Over the past two years, three-month average payment rates and gross yield have averaged 54% and 24%, respectively. The three-month average loss rate was 1.4% as of July 31, 2021, 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.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating Canadian Credit Card and Personal Line of Credit Securitizations (November 4, 2020), 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

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

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