DBRS Morningstar Confirms Ratings of CARDS II Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings of the following 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 2019-2 at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2019-2 at A (sf)
-- Credit Card Receivables-Backed Class C Notes, Series 2019-2 at BBB (sf)

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

-- Credit Card Receivables-Backed Class A Notes, Series 2022-1 at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2022-1 at A (sf)
-- Credit Card Receivables-Backed Class C Notes, Series 2022-1 at BBB (sf)

-- Credit Card Receivables-Backed Class A Notes, Series 2022-3 at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2022-3 at A (high) (sf)
-- Credit Card Receivables-Backed Class C Notes, Series 2022-3 at BBB (sf)

-- Credit Card Receivables-Backed Class A Notes, Series 2023-1 at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2023-1 at A (high) (sf)
-- Credit Card Receivables-Backed Class C Notes, Series 2023-1 at BBB (sf)

-- Credit Card Receivables-Backed Class A Floating Rate Notes, Series 2023-2 at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2023-2 at A (high) (sf)
-- Credit Card Receivables-Backed Class C Notes, Series 2023-2 at BBB (sf)

The rating actions are based on the following factors as of June 2023:

(1) The Notes benefit from excess spread 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%. The three-month average excess spread has been in the range of 15.6% to 20.2% over the last 12 months.

(2) The AAA (sf) rated Class A Notes for all outstanding series benefit from subordination equivalent to 7.25%. The A (sf) rated Class B Notes for Series 2019-2, 2021-1, and 2022-1 benefit from subordination equivalent to 2.50%, and the A (high) (sf) rated Class B Notes for Series 2022-3, 2023-1, and 2023-2 benefit from subordination equivalent to 3.00%.

(3) The payment rate continues to be strong, standing at 54.3% as of June 2023. It has averaged 53.9% over the last 12 months. Gross yields have also been strong, standing at 25.2% as of June 2023, and averaging 24.5% over the last 12 months.

(4) Net losses have increased slightly to 1.7% as of June 2023, compared with 1.5% as of June 2022, but remain low. It has averaged 1.7% over the last 12 months.

(5) Canadian Imperial Bank of Commerce 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.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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/416784 (July 4, 2023).

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

The principal methodology applicable to the credit rating is Master Canadian Structured Finance Surveillance Methodology (June 7, 2023; https://www.dbrsmorningstar.com/research/415503).

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 credit rating was initiated at the request of the rated entity.

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

This is a solicited credit rating.

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

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

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

A description of how DBRS Morningstar analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/410863.

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