CANADIAN IMPERIAL BANK OF COMMERCE
Fitch Ratings has assigned the following ratings to
The transaction is a securitization of credit card receivables and is sponsored by
RATING ACTIONS
Entity / Debt
Rating
Prior
Class A
LT
AAAsf
New Rating
Class B
LT
Asf
New Rating
A(EXP)sf
Class C
LT
BBBsf
New Rating
BBB(EXP)sf
Page
of 1
VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Receivables Performance and Collateral Characteristics: The underlying collateral characteristics play a vital role in the performance of a credit card ABS transaction. Fitch closely examines such collateral characteristics as credit quality, seasoning, geographic concentration, delinquencies and utilization rate on the cards. Performance for the trust remained stronger than pre-pandemic levels, with net chargeoffs showing early signs of normalization from recent lows.
As of the
Credit enhancement (CE) remains sufficient, with robust loss multiples that are in line with the current ratings. The Stable Outlook on the notes reflects Fitch's expectation that performance will remain supportive of these ratings.
Originator and Servicer Quality: CIBC (AA-/F1+/Stable) is an effective and capable originator and servicer, as evidenced by historical delinquency and loss performance of the trust's receivables. Any deterioration in CIBC's financial condition may affect the performance of the collateral pool backing the series 2023-1 notes.
Counterparty Risk: The ratings for the series 2023-1 notes are dependent on the financial strength of certain counterparties. Fitch believes this risk is currently mitigated, as evidenced by the ratings of the applicable counterparties to the transaction.
Interest Rate Risk: Interest rate risk is currently mitigated by the available CE. CE supporting the class A notes is derived from 7.25% subordination of class B and C notes, excess spread and a cash reserve account (CRA) to be funded by the trust when excess spread falls to, or below, 4.00%. Class B notes will benefit from 3.00% CE derived through the subordination of class C notes, excess spread and the CRA. Class C notes' CE is derived from excess spread and the CRA. The CRA will not be funded at closing.
Fitch analyzed characteristics of the underlying collateral to better assess overall asset performance. This supplements Fitch's analysis of the originator's historical data when determining the following steady state performance assumptions and stresses:
Steady State:
Annualized Chargeoffs - 6.50%;
Monthly Payment Rate - 32.00%;
Annualized Gross Yield - 19.00%;
Purchase Rate - 100.00%.
Rating Level Stresses (for AAAsf, Asf and BBBsf, respectively):
Chargeoffs (increase) - 4.50x/3.00x/2.25x;
Payment Rate (% decrease) - 60.00/50.40/43.20;
Gross Yield (% decrease) - 35.00/25.00/20.00;
Purchase Rate (% decrease) - 50.00/40.00/35.00.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Rating sensitivity to increased chargeoff rate:
Current ratings for class A, B, and C (steady state: 6.50%): 'AAAsf'; 'Asf'; 'BBBsf';
Increase base case by 25%: 'AA+sf'; 'A-sf'; 'BBB-sf';
Increase base case by 50%: 'AAsf'; 'BBB+sf'; 'BBsf';
Increase base case by 75%: 'AA-sf'; 'BBBsf'; 'BB-sf'.
Rating sensitivity to reduced purchase rate:
Current ratings for class A, B, and C (100% base assumption): 'AAAsf'; 'Asf'; 'BBBsf';
Reduce purchase rate by 50%: 'AA+sf'; 'Asf'; 'BBBsf';
Reduce purchase rate by 75%: 'AA+sf'; 'Asf'; 'BBBsf';
Reduce purchase rate by 100%: 'AAsf'; 'BBB+sf'; 'BBB-sf'.
Rating sensitivity to increased chargeoff rate and reduced MPR:
Current ratings for class A, B, and C (chargeoff steady state: 6.50%; MPR steady state: 32.00%): 'AAAsf'; 'Asf'; 'BBBsf';
Increase chargeoff rate by 25% and reduce MPR by 15%: 'AAsf'; 'BBB+sf'; 'BB+sf';
Increase chargeoff rate by 50% and reduce MPR by 25%: 'Asf'; 'BBB-sf'; 'BB-sf';
Increase chargeoff rate by 75% and reduce MPR by 35%: 'BBB+sf'; 'BBsf'; 'Bsf'.
Fitch has revised its global economic outlook forecasts as a result of the European gas crisis, high inflation and sharp acceleration in the pace of global monetary policy tightening. Downside risks have increased, and, therefore, Fitch has published an assessment of the potential rating and asset performance impact of a plausible, albeit worse than expected, adverse stagflation scenario on Fitch's major structured finance and covered bond subsectors (see 'What a Stagflation Scenario Would Mean for Global Structured Finance').
Fitch expects the North American credit card ABS sector in the assumed adverse scenario to experience 'Virtually No Impact' on ratings performance, indicating very few (less than 5%) Outlook changes. Fitch expects 'Virtually No Impact' on asset performance, indicating asset performance to remain broadly unaffected, and less than a 10% likelihood of a sector outlook revision by YE 2023. Fitch expects the asset performance impact of the adverse case scenario to be more modest than the most stressful scenario shown above, which increases defaults by 75% and reduces MPR by 35%.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Rating sensitivity to decreased chargeoff rate:
Current ratings for the class A, B and C notes (steady state: 6.50%): 'AAAsf', 'Asf' and 'BBBsf', respectively;
Decrease base case by 50%: 'AAAsf', 'AAAsf' and 'AAsf', respectively.
Some of the outstanding subordinate tranches of
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
Additional information is available on www.fitchratings.com
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