MOODY'S PLACES 23 CLASSES OF SECURITIES ISSUED BY PROVIDIAN'S CREDIT CARD TRUSTS UNDER REVIEW FOR POSSIBLE UPGRADE
Approximately $1.6 Billion of Asset-Backed Securities Affected.
New York, June 21, 2005 -- Moody's Investors Service has placed the ratings on twenty-three
classes of credit card receivables-backed securities issued from
the Providian Gateway Master Trust (the Trust) and the related Providian
owner trusts under review for possible upgrade.
Moody's said that this rating action follows the June 6, 2005 announcement
by Washington Mutual, Inc. (Washington Mutual) that it had
entered into a definitive agreement to acquire Providian Financial Corporation
(Providian). On the same day, Moody's affirmed the
ratings and stable outlook of Washington Mutual, Inc. (Senior
Debt at A3) and its thrift subsidiaries (Deposits at A2). The rating
agency also put the ratings of Providian National Bank (Deposits at Ba2,
Issuer Strength at Ba3, and Bank Financial Strength at D) under
review for possible upgrade. The ratings of Providian (Senior Debt
at B2) were placed under review in January, and remain under review
for upgrade.
Moody's review of Providian's receivables-backed securities
will focus primarily on the financial strength of the seller/servicer
as well as the integration of Providian's credit card business with
Washington Mutual's mortgage-based business model.
Upon acquisition, it is expected that Providian National Bank will
merge with one of Washington Mutual's thrift subsidiaries,
Washington Mutual Bank, FSA. Washington Mutual Bank will
be the surviving entity and assume the role of seller/servicer for the
related asset-backed programs. The current rating of Washington
Mutual Bank is considerably stronger than that of Providian National Bank.
The credit strength of the seller/servicer is an important consideration
in Moody's credit opinion of the related asset-backed securities
due to the correlation between the viability of the revolving securitization
program and that of the related seller/servicer. It is Moody's
opinion that higher-rated seller/servicers are more likely to maintain
the ongoing servicing and origination requirements of such a program.
Furthermore, the relatively strong credit profile of Washington
Mutual Bank will provide the credit card business with access to broader
and cheaper sources of financing, which may allow Providian to compete
more effectively in the middle and prime segments of the credit card market.
Over the past three years, current Providian management have successfully
grown the middle-market segment of their business and may benefit
further from cross-sale opportunities with Washington Mutual's
customer base. However, Providian has had more difficulty
in expanding the much more price-sensitive prime segment of their
card business. Competition in the prime segment of the market is
formidable and includes issuers with much greater scale and/or financial
resources than the pro forma combined Providian and Washington Mutual
entity; therefore, Moody's believes the company's
forays in to the prime card market will continue to be a challenge.
The ratings review will conclude after all the necessary approvals for
the acquisition have been received, at which point Moody's
expects Providian's ratings will be raised to the level of Washington
Mutual's for similar instruments.
The complete rating action is as follows:
UNDER REVIEW FOR POSSIBLE UPGRADE
Issuer: Providian Gateway Master Trust
$29,605,000 Class B Certificate, Series 2002-B,
rated Baa3
$118,422,000 Class C Certificate, Series 2002-B,
rated Ba3
$63,694,000 Class B Certificate, Series 2003-A,
rated Ba3
Issuer: Providian Gateway Owner Trust
$73,200,000 Class B Certificate, Series 2004-A,
rated Aa2
$112,020,000 Class C Certificate, Series 2004-A,
rated A2
$84,630,000 Class D Certificate, Series 2004-A,
rated Baa2
$100,605,000 Class E Certificate, Series 2004-A,
rated Ba3
$68,200,000 Class B Certificate, Series 2004-B,
rated Aa2
$96,300,000 Class C Certificate, Series 2004-B,
rated A2
$80,250,000 Class D Certificate, Series 2004-B,
rated Baa2
$72,220,000 Class E Certificate, Series 2004-B,
rated Ba3
$50,600,000 Class B Certificate, Series 2004-D,
rated Aa2
$89,500,000 Class C Certificate, Series 2004-D,
rated A2
$70,100,000 Class D Certificate, Series 2004-D,
rated Baa2
$68,113,000 Class E Certificate, Series 2004-D,
rated Ba3
$49,383,000 Class B Certificate, Series 2004-E,
rated Aa2
$61,728,000 Class C Certificate, Series 2004-E,
rated A2
$61,728,000 Class D Certificate, Series 2004-E,
rated Baa2
$64,814,800 Class E Certificate, Series 2004-E,
rated Ba2
$27,410,000 Class B Certificate, Series 2004-F,
rated Aa2
$48,494,000 Class C Certificate, Series 2004-F,
rated A2
$37,951,000 Class D Certificate, Series 2004-F,
rated Baa2
$35,843,500 Class E Certificate, Series 2004-F,
rated Ba2
COLLATERAL PERFORMANCE
The performance of the securitized Providian credit card portfolio remains
within the bounds of Moody's expectations and is not a principal
factor in the ratings review. The long-term average yield,
charge-off rate and payment rate have remained above the industry
average as measured by Moody's Credit Card Index.
BACKGROUND
Providian Financial Corporation, headquartered in San Francisco,
California, is the ninth largest credit card issuer in the U.S.
with managed credit card receivables of $18.4 billion at
May 31, 2005. Providian National Bank, the originator
and servicer of the Providian credit card receivables, is a San
Francisco based, FDIC-insured bank and a direct subsidiary
of Providian Financial Corp. Providian National Bank has a long-term
deposit rating of Ba2, and a bank financial strength rating of C,
all of which are under review for possible upgrade.
Washington Mutual, Inc., headquartered in Seattle,
Washington, is the largest thrift holding company in the U.S.
and sixth largest among U.S. bank and thrift companies,
with assets of $320 billion at September.
New York
Jay Eisbruck
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Jinhua (Rachel) Sun
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653