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Rating Action:

Moody's Confirms A2 Ratings of Discover's Class B Certificates

02 Feb 2007
Moody's Confirms A2 Ratings of Discover's Class B Certificates

Approximately $1 billion of Asset-Backed Securities Affected

New York, February 02, 2007 -- Moody's Investors Service confirmed the ratings on twenty-two classes of subordinated Class B securities issued through Discover Card Master Trust I (the Trust). These securities were placed under review for possible downgrade on December 19, 2006. The confirmation of the ratings concludes Moody's review of the outstanding certificates.

This rating action contemplates Morgan Stanley's December 19, 2006 announcement of its intent to pursue a spin-off of its subsidiary, Discover Financial Services (Discover). Moody's then affirmed the Aa3 senior unsecured rating of Discover's parent company, Morgan Stanley. At the same time, the A3 bank deposit and debt ratings, and the short-term Prime-2 rating of Discover's wholly owned bank, Discover Bank, were placed under review for possible downgrade. If the spin-off occurs as planned, then Moody's expects to assign a Baa2 long-term deposit rating and Baa3 senior unsecured debt rating to Discover Bank, with a stable outlook.

The rationale for the confirmation incorporated the new aspects to Moody's approach to rating credit card transactions published in December 2006. Moody's methodology now incorporates a deeper analysis of the collateral driven by both fundamental changes in credit card usage (e.g. the proliferation of rewards cards, cardholders' convenience use and pricing elasticity) as well as better issuer-supplied data.

In Discover's case, the new aspects of the methodology, in combination with additional data provided by the company, demonstrated to Moody's that the overall performance of the Trust should be better in stress cases than previously expected.

For a more details on Moody's updated credit card rating methodology, please visit www.moodys.com for the report, "Moody's Approach to Rating Credit Card Receivables-Backed Securities."

The following ratings were confirmed:

Issuer: Discover Card Master Trust I

$52,632,000 Floating Rate Class B Certificates, Series 1996-4, rated A2

$35,368,000 Floating Rate Class B Certificates, Series 1998-5, rated A2

$63,158,000 Floating Rate Class B Certificates, Series 2001-1, rated A2

$26,316,000 Floating Rate Class B Certificates, Subseries 3, Series 2003-1, rated A2

$52,632,000 3.85% Class B Certificates, Series 2003-2, rated A2

$47,369,000 Floating Rate Class B Certificates, Series 2003-3, rated A2

$57,895,000 Floating Rate Class B Certificates, Subseries 1, Series 2003-4, rated A2

$39,474,000 Floating Rate Class B Certificates, Subseries 2, Series 2003-4, rated A2

$65,790,000 Floating Rate Class B Certificates, Series 2004-1, rated A2

$65,790,000 Floating Rate Class B Certificates, Subseries 1, Series 2004-2, rated A2

$26,316,000 Floating Rate Class B Certificates, Subseries 2, Series 2004-2, rated A2

$78,948,000 Floating Rate Class B Certificates, Series 2005-1, rated A2

$42,106,000 Floating Rate Class B Certificates, Series 2005-2, rated A2

$78,948,000 Floating Rate Class B Certificates, Series 2005-3, rated A2

$36,843,000 Floating Rate Class B Certificates, Subseries 1, Series 2005-4, rated A2

$42,106,000 Floating Rate Class B Certificates, Subseries 2, Series 2005-4, rated A2

$39,474,000 Floating Rate Class B Certificates, Subseries 1, Series 2006-1, rated A2

$39,474,000 Floating Rate Class B Certificates, Subseries 2, Series 2006-1, rated A2

$31,579,000 Floating Rate Class B Certificates, Subseries 1, Series 2006-2, rated A2

$31,579,000 Floating Rate Class B Certificates, Subseries 2, Series 2006-2, rated A2

$16,843,000 Floating Rate Class B Certificates, Subseries 3, Series 2006-2, rated A2

$26,316,000 Floating Rate Class B Certificates, Series 2006-3, rated A2

BACKGROUND

Discover Bank, the originator and servicer of the Discover card receivables, is a Delaware-chartered, FDIC-insured bank and an indirect subsidiary of Morgan Stanley. Discover Bank has a long-term deposit rating of A3, a short-term deposit rating of Prime-2 (both under review for possible downgrade), and a bank financial strength rating of C-. Moody's rates Morgan Stanley's long-term debt Aa3 (stable outlook).

New York
William Black
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Jinhua (Rachel) Sun
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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