Morningstar DBRS Assigns Provisional Credit Ratings of AAA (sf) and A (sf) to Glacier Credit Card Trust, Series 2024-1

DBRS Limited (Morningstar DBRS) assigned provisional credit ratings to the following notes to be issued by Glacier Credit Card Trust (the Trust):

-- AAA (sf) to the Credit Card Asset-Backed Senior Notes, Series 2024-1 (the Senior Notes)
-- A (sf) to the Credit Card Asset-Backed Subordinated Notes, Series 2024-1 (the Subordinated Notes; together, with the Senior Notes, the Notes)

Finalization of the ratings is contingent upon receipt of final documents conforming to information already received by Morningstar DBRS.

Morningstar DBRS considered the following factors in its analysis:

(1) For the Senior Notes, credit enhancement (CE) will be available through (A) subordination, providing preferential access to cash flows relative to the Subordinated Notes (6.5% of the Initial Invested Amount); (B) overcollateralization (the Enhancement Amount), which consists of entitlement to additional receivables and is dynamic (7.0% of the unadjusted Invested Amount); and (C) excess spread.

(2) For the Subordinated Notes, CE will be available through (A) the Enhancement Amount (7.0% of the unadjusted Invested Amount) and (B) excess spread.

(3) Over the past three years, three-month average payment rates and gross yield averaged approximately 30% and 22%, respectively. The three-month average net loss rate was 6.0% as of April 30, 2024. Although payment rates have come down from their peak and net loss rates have returned to historical levels prior to the Coronavirus Disease pandemic, overall performance of the portfolio continues to remain strong.

(4) The portfolio is generally higher credit risk and comprises more revolvers (i.e., cardholders that carry an outstanding balance from month to month) than other Morningstar DBRS-rated credit card securitization portfolios, as evidenced by the portfolio's historically higher loss rates and lower payment rates compared with other Canadian issuers. This is mitigated by Canadian Tire Bank's strong credit risk management, servicing experience, and appropriately sized CE levels.

(5) The Receivables pool is a well-diversified and seasoned portfolio, with 100% of the Receivables arising from accounts that are at least five years old, as of March 31, 2024. The number of accounts in the selected pool exceeded 3.6 million as of March 31, 2024.

Morningstar DBRS'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 to repay the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of the Notes.

While Morningstar DBRS's "Legal Criteria for Canadian Structured Finance" expects collections to be remitted to a Trust account within two business days if the Servicer is no longer rated investment grade, Morningstar DBRS notes that the transaction documents allow partial commingling to continue as long as Canadian Tire Bank is the Servicer, given the Servicer performance guarantee provided by Canadian Tire Corporation, Limited (CTC). If CTC (rated BBB with a Stable trend by Morningstar DBRS) is downgraded to below investment grade and a Servicer Termination Event occurs, subject to certain conditions (please refer to the corresponding presale report), collections will be remitted within two business days. If a Servicer Termination Event does not occur, Morningstar DBRS will assess the impact of partial commingling at the time and take appropriate rating action.

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

Morningstar DBRS also notes that a true sale opinion in respect of the co-ownership interests in any new accounts that may be added will not be delivered in connection with each account addition, as expected in Morningstar DBRS's "Legal Criteria for Canadian Structured Finance." Morningstar DBRS considers the risk minimal as additional accounts are transferred to the Custodian infrequently, an Officer's Certificate is provided by the Seller in connection with each additional account transfer and a true-sale opinion in respect of the co-ownership interests in any new accounts that may be added will be delivered every six months for any additions made within the previous six months.

Morningstar DBRS' credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related principal and interest amounts.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030 (January 23, 2024).

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

The principal methodology applicable to the credit rating is Rating Canadian Credit Card and Personal Line of Credit Securitizations (https://dbrs.morningstar.com/research/422341; October 24, 2023).

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

The Morningstar DBRS Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. Morningstar DBRS analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://dbrs.morningstar.com/research/416703.

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@morningstar.com.

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.

Morningstar DBRS 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

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://dbrs.morningstar.com/about/methodologies.

Operational Risk Assessments for Canadian Structured Finance
https://dbrs.morningstar.com/research/430834 (April 5, 2024)

Legal Criteria for Canadian Structured Finance
https://dbrs.morningstar.com/research/416101 (June 20, 2023)

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

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