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By clicking “I AGREE”, you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s information that becomes accessible to you (the “Information”). References herein to “Moody’s” include Moody’s Corporation. and each of its subsidiaries and affiliates..

 

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Rating Action:

Moody's assigns (P)Aaa (sf) rating to DiscoverSeries Class A(2011-1) Notes

25 Feb 2011

$1.0 billion of asset-backed securities rated

New York, February 25, 2011 -- Moody's Investors Service has assigned a (P)Aaa (sf) rating to the DiscoverSeries Class A(2010-1) notes issued by the Discover Card Execution Note Trust.

The complete rating action is as follows:

Issuer: Discover Card Execution Note Trust ("the Trust" or "DCENT")

$1,000,000,000 DiscoverSeries Class A(2011-1), rated (P)Aaa (sf)

RATINGS RATIONALE

The rating is based on the quality of the underlying credit card receivables, the transaction's structural protections, the expertise of Discover Bank ("Discover") as servicer, and the credit enhancement from subordinate classes of notes in the series of which the notes are a part (the "DiscoverSeries").

The DiscoverSeries Class A(2010-1) notes have a floating rate coupon of 1 month LIBOR + 0.35% per year and an expected maturity date of February 18, 2014. The legal maturity date for these notes is August 15, 2016. Moody's rating addresses the likelihood of interest payments being made when due and the return of principal by the legal maturity date.

The assets of the Trust consist of The Discover Card Master Trust I ("Trust I"), Series 2007-CC collateral certificate, which represents an undivided interest in Trust I's credit card receivables that were originated, and serviced, by Discover. Discover is a wholly-owned subsidiary of Discover Financial Services. Discover's long-term bank deposit rating is Baa3, its bank financial strength rating is D+, and its short-term deposits and other short-term senior obligations are rated Prime-3.

Moody's expects performance in the range of 6% - 8% for charge-offs, 24% - 27% for yield and 17% - 20% for the principal payment rate.

Moody's performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities were rated. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.

The principal methodology used in rating these transactions was "Moody's Approach To Rating Credit Card Receivables-Backed Securities", published in April 2007. Further information on Moody's analysis of these transactions is available on www.moodys.com. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

The Volatility Score ("V Score") for this transaction is Medium, which is in line with the V score assigned for the U.S. Credit Card ABS sector. On December 19, 2008, Moody's published a report introducing V Scores and Parameter Sensitivities for the global credit card ABS sector. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. V Scores are intended to rank transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches).

Parameter Sensitivities provide a quantitative, model-indicated calculation of the number of notches that a Moody's-rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. It is not intended to measure how the rating of the security might migrate over time, but rather how the initial rating of the security might differ as certain key parameters vary.

In rating US Credit Card ABS, the payment rate, charge-off rate, purchase rate, yield and certain other inputs are used to calculate the median expected loss and the Aaa enhancement. These two, in turn, are the inputs used to determine a new lognormal loss distribution. Three new lognormal loss distributions were calculated for each rating class by assuming the following three payment and gross charge-off rate combinations: (1) 15%/11%, (2) 11%/15% and (3) 7%/19% from the base case of 19%/17%. The quantitative/model-indicated Parameter Sensitivities for the notes under these three additional scenarios are:

For the Class A Notes, one notch (i.e. Aaa to Aa1), two notches and four notches, respectively.

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments in this transaction.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service's information.

Moody's Investors Service considers the quality of information available on the issuer satisfactory for the purposes of assigning a credit rating.

Additional research, including a pre-sale report, is available at www.moodys.com. A special report entitled "V Scores and Parameter Sensitivities in the Global Credit Card ABS Sector" is also available on moodys.com.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Gregory J. Gemson
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Luisa De Gaetano
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns (P)Aaa (sf) rating to DiscoverSeries Class A(2011-1) Notes
No Related Data.
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