DBRS Morningstar Finalizes Provisional Ratings of AAA (sf), A (sf), and BBB (sf) on Eagle Credit Card Trust, Series 2023-1

DBRS Limited (DBRS Morningstar) finalized the provisional ratings on the Credit Card Receivables-Backed Notes, Series 2023-1 issued by Eagle Credit Card Trust (the Trust) as follows:

-- AAA (sf) on the Credit Card Receivables-Backed Class A Notes, Series 2023-1 (the Class A Notes)
-- A (sf) on the Credit Card Receivables-Backed Class B Notes, Series 2023-1 (the Class B Notes)
-- BBB (sf) on the Credit Card Receivables-Backed Class C Notes, Series 2023-1 (the Class C Notes; collectively with the Class A Notes and Class B Notes, the Notes)

Series 2023-1 has a Targeted Principal Distribution Date of June 17, 2028.

DBRS Morningstar considered the following factors in its analysis:

(1) For the Class A Notes, credit enhancement is available through subordination of 7.0%, providing preferential access to cash flows relative to the Class B Notes and Class C Notes, excess spread, and the Reserve Account, which could build up to 5% of the Invested Amount.

(2) For the Class B Notes, credit enhancement is available through subordination of 3.5%, providing preferential access to cash flows relative to the Class C Notes, excess spread, and the Reserve Account.

(3) For the Class C Notes, credit enhancement is available through excess spread and the Reserve Account.

(4) Payment rates and gross yield are among the highest in Canada. Over the past three years, three-month average payment rates have averaged 65%, while three-month average gross yield has averaged 25%. The three-month average net loss rate has also been strong, averaging approximately 2.8% over the past three years. Although payment rates and net loss rates have trended toward historical levels prior to the Coronavirus Disease (COVID-19) pandemic, the portfolio’s overall performance continues to remain strong.

(5) The receivables pool is diversified and well-seasoned, with approximately 84.8% of the receivables arising from accounts that are at least 48 months old as of March 31, 2023.

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

DBRS Morningstar notes the transaction documents do not require the remittance of collections into a Trust account within two business days when the Performance Guarantor is no longer rated investment grade, as expected in DBRS Morningstar’s “Legal Criteria for Canadian Structured Finance” methodology. Should the Performance Guarantor be downgraded below investment grade, DBRS Morningstar will assess the impact of partial commingling at the time and take appropriate rating action.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929 (May 17, 2022).

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

The principal methodology applicable to the ratings is Rating Canadian Credit Card and Personal Line of Credit Securitizations (November 1, 2022; https://www.dbrsmorningstar.com/research/404530).

Other methodologies referenced in this transaction are listed at the end of this press release.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

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

This is a solicited credit rating.

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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

Legal Criteria for Canadian Structured Finance (June 22, 2022; https://www.dbrsmorningstar.com/research/398729)

Operational Risk Assessments for Canadian Structured Finance (April 4, 2023; https://www.dbrsmorningstar.com/research/412270)

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