Approximately CAD$953.5 million in asset-backed securities affected
Toronto, December 01, 2011 -- Moody's confirmed today the ratings on all outstanding notes issued by
Gloucester Credit Card Trust ("Gloucester" or the "Trust")
following the December 1, 2011 acquisition of the MBNA Canada credit
card business by Toronto-Dominion Bank ("TD") (Aaa, P-1,
B+). These notes are backed by co-ownership interests
in a $2.5 billion revolving pool of credit card receivables.
Further, the program changes being made to effect the transfer of
sponsorship to TD will 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 Gloucester at this time. These changes include
TD assuming the roles of Seller, Servicer and Administrative Agent
for the Trust as well as other amendments required to replace MBNA and
implement TD's assumption of the programs obligations.
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.
RATINGS RATIONALE
The strong financial strength of TD, the new bank sponsor of Gloucester,
as well as improving Trust performance, motivate the ratings confirmation.
The June 22, 2011 ratings review was driven by the weakening financial
strength of FIA Card Services, N.A. (A2), a
subsidiary of Bank of America Corporation ("Bank of America") (Baa1 negative,
P-2) and the parent of MBNA Canada Bank (the seller/servicer prior
to December 1, 2011). Moody's had placed FIA Card Services,
N.A. under review for possible downgrade on June 2,
2011.
The acquisition is a credit positive for the asset-backed notes
issued by Gloucester as it replaces the weakening sponsorship of Bank
of America with TD's superior financial strength. The financial
strength of the sponsor bank is an important factor in Moody's determination
of card ABS ratings, as an issuer's ongoing willingness and ability
to maintain card utility (i.e. the purchase rate) is a significant
driver of trust collateral performance in an early amortization scenario.
As such, TD's Aaa rating implies a lower probability of default
of the sponsor bank and results in a stronger credit profile for Gloucester,
holding other variables constant.
The impact on Gloucester performance is expected to be neutral as TD will
run the MBNA portfolio as a separate line of business under the MBNA brand
during an approximate 18-month period and so we do not anticipate
servicing related disruptions. TD has stated it will tighten existing
underwriting standards and discontinue MBNA's practice of offering low
promotional interest rates. As a result, TD will be re-pricing
some of the weaker accounts supporting the Gloucester notes and losses
may increase for these accounts; however, we do not expect
performance to deteriorate as a result as the affected receivables account
for only a small share of the total trust balance.
Moody's performance expectations for Gloucester have been revised.
The expected range for the charge-off rate was lowered to 4.0%
- 6.0% (from 5.5% - 7.5%),
and the principal payment rate range was increased to 14.0%
- 17.0% (from 11.0% - 14.0%).
Our expectations for the yield remain 15.5% - 18.5%.
The complete rating actions are as follows:
$253,500,000 Series 2004-1 Class A , Confirmed
at Aaa (sf); previously on June 22, 2011 Placed on Review for
Possible Downgrade
$300,000,000 Series 2006-2 Class A, Confirmed
at Aaa (sf); previously on June 22, 2011 Placed on Review for
Possible Downgrade
$400,000,000 Series 2008-1 Class A, Confirmed
at Aaa (sf); previously on June 22, 2011 Placed on Review for
Possible Downgrade
These performance expectations indicate our forward-looking view
of the likely range of performance over the medium term. From time
to time, we may, if warranted, change these expectations.
Performance that falls outside a given range may indicate that the collateral's
credit quality is stronger or weaker than 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 primary source of assumption uncertainty relates to
the migration of underwriting and servicing to TD's standards.
Additional performance uncertainties include still elevated (relative
to pre-recession) unemployment rates and increasing consumer debt
levels.
METHODOLOGY
The principal methodology used in this rating was "Moody's Approach To
Rating Credit Card Receivables-Backed Securities", published
in April 2007. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
Although the following credit ratings have been issued in a non-EU
country which has not been recognized as endorsable at this date,
these credit ratings are deemed "EU qualified by extension"
and may still be used by financial institutions for regulatory purposes
until 31 January 2012. ESMA may extend the use of credit ratings
for regulatory purposes in the European Community for three additional
months, until 30 April 2012, if ESMA decides that exceptional
circumstances arise that may imply potential market disruption or financial
instability. Further information on the EU endorsement status and
on the Moody's office that has issued a particular Credit Rating
is available on www.moodys.com.
Gloucester Credit Card Trust, Series 2004-1
Gloucester Credit Card Trust, Series 2006-2
Gloucester Credit Card Trust, Series 2008-1
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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 Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's 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 www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Michael Buzanis
VP - Senior Credit Officer
Structured Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635
Luisa De Gaetano
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635
Moody's confirms ratings of Gloucester credit card notes