Fitch Ratings has assigned ratings and Rating Outlooks to
The transaction is a securitization of credit card receivables originated 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
BBB+sf
New Rating
BBB+(EXP)sf
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Receivables' Performance and Collateral Characteristics: The underlying collateral performance and characteristics play a vital role in a credit card ABS transaction. Fitch closely examines the trust's performance history and such collateral characteristics as credit quality, seasoning, geographic concentration, delinquencies and utilization rates on the cards. Performance for the trust has remained strong over the past 12 months, particularly when compared with pre-pandemic levels and within Fitch's steady state assumptions. As of the
Originator and Servicer Quality: Fitch views
Counterparty Risk: Fitch's ratings of the 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 transactions.
Interest Rate Risk: Interest rate risk is currently mitigated by the available credit enhancement (CE). CE supporting the class A notes is 6.50%, derived from 4.50% subordination of class B notes and 2.00% subordination of class C notes, as well as the reserve account that may be funded if excess spread falls to or below 4.00%. Class B notes are supported by 2.00% subordination of class C notes and the reserve account. Class C notes are supported by the reserve account.
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 Charge-offs - 5.00%;
MPR - 43.00%;
Annualized Gross Yield - 18.00%;
Purchase Rate - 100.00%.
Rating Level Stresses (for 'AAAsf', 'Asf' and 'BBB+sf', respectively):
Charge-offs (increase) - 5.00x/3.25x/2.75x;
MPR (% decrease) - 65.00/54.60/49.40;
Gross Yield (% decrease) - 35.00/25.00/21.67;
Purchase Rate (% decrease) - 50.00/40.00/36.67.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Rating sensitivity to increased charge-off rate:
Current ratings for the class A, class B and class C notes (steady state: 5.00%): 'AAAsf'; 'Asf'; 'BBB+sf';
Increase base case by 25%: 'AAAsf'; 'Asf'; 'BBB+sf';
Increase base case by 50%: 'AA+sf'; 'A-sf'; 'BBB-sf';
Increase base case by 75%: 'AA+sf'; 'BBB+sf'; 'BB+sf'.
Rating sensitivity to reduced purchase rate:
Current ratings for the class A, class B and class C notes (100% base assumption): 'AAAsf'; 'Asf'; 'BBB+sf';
Reduce purchase rate by 50%: 'AAAsf'; 'Asf'; 'A-sf';
Reduce purchase rate by 75%: 'AAAsf'; 'Asf'; 'BBB+sf';
Reduce purchase rate by 100%: 'AA+sf'; 'A-sf'; 'BBBsf'.
Rating sensitivity to increased charge-off rate and reduced MPR:
Current ratings for the class A, class B and class C notes (charge-off steady state: 5.00%; MPR steady state: 43.00%): 'AAAsf'; 'Asf'; 'BBB+sf';
Increase charge-off rate by 25% and reduce MPR by 15%: 'AA+sf'; 'A-sf'; 'BBBsf';
Increase charge-off rate by 50% and reduce MPR by 25%: 'AAsf'; 'BBB+sf'; 'BB+sf';
Increase charge-off rate by 75% and reduce MPR by 35%: 'Asf'; 'BBBsf'; 'BB-sf'.
Fitch has revised its global economic outlook forecasts as a result of the war in
Fitch expects the North American prime credit card ABS sector in the assumed adverse scenario to experience 'Virtually No Impact' on rating performance, indicating very few (less than 5%) rating or Outlook changes. Fitch expects 'Virtually No Impact' on asset performance, indicating asset performance to remain broadly unaffected, and less than 10% likelihood of sector outlook revision by end-2023. Fitch expects the asset performance impact of the adverse case scenario to be more modest than the most stressful scenario shown below, 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 charge-off rate:
Current ratings for the class A, class B and class C notes (steady state: 5.00%): 'AAAsf', 'Asf' and 'BBB+sf', respectively;
Decrease base case by 50%: 'AAAsf', 'AAAsf' and 'AA+sf', 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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