$1.0 billion of asset-backed securities rated
New York, March 08, 2011 -- Moody's Investors Service has assigned a definitive Aaa (sf) rating to
the DiscoverSeries Class A(2011-1) Notes issued by the Discover
Card Execution Note Trust.
In addition, Moody's announced today that the issuance of the DiscoverSeries
Class A(2011-1) Notes on March 8, 2011 would not, in
and of itself, result in a reduction, withdrawal, or
placement under review for possible downgrade of the ratings currently
assigned to any class of outstanding notes issued by Discover Card Execution
Note Trust or certificates issued by Discover Card Master Trust I at this
time. However, Moody's ratings address only the credit risks
associated with the transaction. Other non-credit risks
have not been addressed, but may have significant effect on yield
and/or other payments to investors. This press release should not
be taken to imply that there will be no adverse consequence for investors
since in some cases such consequences will not impact the rating.
The complete rating action is as follows:
Issuer: Discover Card Execution Note Trust, DiscoverSeries
Notes ("the Trust" or "DCENT")
Cl. A (11-1), Definitive Rating Assigned Aaa (sf)
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(2011-1) 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
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.
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.
Gregory J. Gemson
Structured Finance Group
Moody's Investors Service
Luisa De Gaetano
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns definitive Aaa (sf) rating to DiscoverSeries Class A(2011-1) Notes
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