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Rating Action:

Moody's downgrades ratings on CompuCredit's credit card-backed notes

19 Feb 2009

Approximately $928 million of asset-backed securities affected

New York, February 19, 2009 -- Moody's Investors Service has downgraded the ratings on 20 classes of asset-backed notes issued by the CompuCredit Credit Card Master Note Business Trust ("MNBT"), CompuCredit Credit Acquired Portfolio Voltage Master Business Trust ("Voltage MBT"), and the CompuCredit Acquired Portfolio Business Trust ("APBT"). These notes are backed by revolving pools of primarily sub-prime, unsecured, general purpose VISA credit card receivables. The rating actions today conclude our review, which commenced on October 27, 2008.

RATIONALE

The downgrades of CompuCredit Corporation's ("CompuCredit") ABS (see below for a complete listing) reflect concerns regarding a sharp erosion in collateral quality as well as heightened pressures on its funding and liquidity as the firm navigates a highly challenging environment for credit card lenders.

The respective collateral pools supporting all three of CompuCredit's trusts are comprised of deeply sub-prime credit card receivables and exhibit performance characteristics consistent with a riskier obligor base. Collateral performance has weakened across each of CompuCredit's trusts over the past several months as the economic conditions for the U.S. consumer continued their negative trajectory. We expect charge-offs to continue rising for the credit card sector, and for the CompuCredit trusts for the intermediate term. Continued stress on the consumer is also likely to place negative pressure on the principal payment rate. Additionally, increasing regulatory scrutiny may constrain CompuCredit's ability to implement portfolio re-pricing or fee adjustment initiatives. The proportion of CompuCredit's fee income is relatively high compared to most other credit card issuers.

With an expectation of worsening collateral performance throughout 2009 and into 2010, balance sheet strength and liquidity have become increasingly important dimensions to our credit analysis, especially for those issuers with limited alternative funding resources, like CompuCredit. The current consumer-led downturn is expected to have more pronounced effect on the performance of CompuCredit's trusts due to their significant exposure to sub-prime collateral. In addition, a heightened focus from bank regulators, as evidenced by the recent passage of the so-called UDAP regulations, and pending Congressional legislation may make it more difficult for CompuCredit to attract and retain partner banks. Unlike nearly all other credit card companies, CompuCredit does not have its own bank subsidiary; therefore, it relies on its partner banks to originate credit card receivables. It is the confluence of these funding risks, deteriorating collateral performance, and regulatory actions that prompted the review and downgrade of the ratings.

The senior bonds, though downgraded significantly to Baa1 for the MNBT, and Baa2 for the Voltage MBT and the APBT, and in all cases downgraded from their original ratings of Aaa, remain investment grade due in large part to strength of the respective securitization structures. The MNBT structure, which for the most part is typical of nearly all credit card asset-backed structures, includes a powerful cash flow allocation feature accelerate repayment of principal to noteholders if collateral performance deteriorates beyond prescribed levels (e.g. when the three-month average excess spread falls below 3%). This, along with 49% of subordination in the MNBT, provides significant protection to senior noteholders even if some of the risks outlined above come to pass.

For example, if the MNBT were to hit an early amortization trigger, one could assume all the following contemporaneous stresses before senior noteholders would take a first dollar of loss: a fully liquidating portfolio (i.e. CompuCredit could no longer fund - and cardholder could no longer make -- any new credit card purchases), charge-offs could rise to approximately 30% (from 17.46% as of January), the payment rate could fall to 2% (from 2.98% as of January), and yield fall to 18% (from 33.78% as of January).

The Voltage MBT and APBT are amortizing pools of revolving credit card loans, each containing similar structural features and current subordination levels of approximately 58% and 70%, respectively.

COLLATERAL PERFORMANCE EXPECTATIONS

Moody's has a negative outlook on the credit card sector. Specifically for the MNBT, our expectation for continuing degradation in collateral performance is reflected in revisions to the published performance expectations for the trust. The revised, medium-term expectations for each of the key performance metrics of the MNBT are a gross charge-off rate in the range of 19% - 22% (previously 15% - 18%), yield in the range of 27% - 30% (previously 29% - 32%), and a principal payment rate in the range of 2.5% - 4.5% (previously 5.5% - 7.5%).

The performance expectations for a given variable 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 the given range may indicate that the collateral's credit quality is stronger or weaker than we 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 complete rating actions are as follows:

Issuer: CompuCredit Credit Card Master Note Business Trust

$164,220,000 Class A Series 2004-Two Asset Backed Notes, Downgraded to Baa1 from Aaa; previously on October 13, 2008 placed under review for possible downgrade

$70,840,000 Class B Series 2004-Two Asset Backed Notes, Downgraded to B1 from A2; previously on October 13, 2008 placed under review for possible downgrade

$28,980,000 Class C Series 2004-Two Asset Backed Notes, Downgraded to B3 from Baa2; previously on October 13, 2008 placed under review for possible downgrade

$22,540,000 Class D-1 Series 2004-Two Asset Backed Notes, Downgraded to Caa1 from Ba2; previously on October 13, 2008 placed under review for possible downgrade

$12,880,000 Class D-2 Series 2004-Two Asset Backed Notes, Downgraded to Caa3 from B2; previously on October 13, 2008 placed under review for possible downgrade

$164,220,000 Class A Series 2004-Three Asset Backed Notes, Downgraded to Baa1 from Aaa; previously on October 13, 2008 placed under review for possible downgrade

$70,840,000 Class B Series 2004-Three Asset Backed Notes, Downgraded to B1 from A2; previously on October 13, 2008 placed under review for possible downgrade

$28,980,000 Class C Series 2004-Three Asset Backed Notes, Downgraded to B3 from Baa2; previously on October 13, 2008 placed under review for possible downgrade

$22,540,000 Class D-1 Series 2004-Three Asset Backed Notes, Downgraded to Caa1 from Ba2; previously on October 13, 2008 placed under review for possible downgrade

$12,880,000 Class D-2 Series 2004-Three Asset Backed Notes, Downgraded to Caa3 from B2; previously on October 13, 2008 placed under review for possible downgrade

Issuer: CompuCredit Credit Acquired Portfolio Voltage Master Business Trust

(Amounts listed approximate issuance outstanding)

$130,422,000 Class A-1 Series 2006-1 Asset Backed Notes, Downgraded to Baa2 from Aaa; previously on October 13, 2008 placed under review for possible downgrade

$30,979,000 Class A-2 Series 2006-1 Asset Backed Notes, Downgraded to Ba2 from Aa2; previously on October 13, 2008 placed under review for possible downgrade

$27,881,000 Class A-3 Series 2006-1 Asset Backed Notes, Downgraded to B1 from A2; previously on October 13, 2008 placed under review for possible downgrade

$52,664,000 Class A-4 Series 2006-1 Asset Backed Notes, Downgraded to B3 from Baa2; previously on October 13, 2008 placed under review for possible downgrade

$8,719,000 Class B Series 2006-1 Asset Backed Notes, Downgraded to Caa3 from Ba2; previously on October 13, 2008 placed under review for possible downgrade

Issuer: CompuCredit Acquired Portfolio Business Trust

(Amounts listed approximate issuance outstanding)

$35,671,000 Class A-1 Series 2004-One Asset Backed Notes, Downgraded to Baa2 from Aaa; previously on October 13, 2008 placed under review for possible downgrade

$16,307,000 Class A-2 Series 2004-One Asset Backed Notes, Downgraded to Ba2 from Aa2; previously on October 13, 2008 placed under review for possible downgrade

$9,173,000 Class A-3 Series 2004-One Asset Backed Notes, Downgraded to B1 from A2; previously on October 13, 2008 placed under review for possible downgrade

$8,153,000 Class A-4 Series 2004-One Asset Backed Notes, Downgraded to B3 from Baa2; previously on October 13, 2008 placed under review for possible downgrade

$8,723,000 Class B Series 2004-One Asset Backed Notes, Downgraded to Caa3 from B2; previously on October 13, 2008 placed under review for possible downgrade

METHODOLOGY

The principal methodology used in rating the transaction was "Moody's Approach To Rating Credit Card Receivables-Backed Securities", which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Credit Policy & Methodologies directory.

BACKGROUND

CompuCredit, headquartered in Atlanta, GA is an originator and servicer of sub-prime credit card receivables. In addition to credit cards, the company provides the under-served consumer credit market with a variety of other credit and related financial services products. As of September 30, 2008, the company had reported assets of approximately $1.7 billion.

For more information see www.moodys.com

New York
Mark DiRienz
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's downgrades ratings on CompuCredit's credit card-backed notes
No Related Data.
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