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Rating Action:

Moody's places subordinate classes of Chase credit card receivables-backed securities on review for possible downgrade

20 Apr 2009

Approximately $6.4 billion of Asset-Backed Securities Affected

New York, April 20, 2009 -- Moody's Investors Service has placed on review for possible downgrade 21 classes of subordinate asset-backed securities issued out of the Chase Issuance Trust ("CHAIT") and the Chase Credit Card Owner Trust ("CHAMT" and together with CHAIT the "Trusts"). These securities are backed by $80 billion (CHAIT) and $9 billion (CHAMT) of consumer credit card receivables originated and serviced by Chase Bank USA, NA ("Chase") and its affiliates.

RATIONALE

The review is driven by deterioration in some of the Trusts' key performance metrics. In the initial stage of the current economic cycle, several of the Trusts' key collateral performance measures compared favorably to the industry as measured by Moody's Credit Card Indices. That comparative advantage was attributable to well-seasoned portfolios comprised of mostly-prime credit card receivables (as measured by credit score) as well as the relatively large number of co-branded and rewards-based credit cards (e.g. United, Marriot, Disney and the Chase Freedom Card). These types of cards typically attract higher credit quality obligors and exhibit superior collateral performance -- higher payment rate and lower loss rate -- compared to generic card offerings.

In the last six months, however, the positive performance differential between the Trusts and the industry average has substantially diminished. Like other credit card issuers, collateral performance has deteriorated in the current economic environment. For example, CHAIT's charge-off rate, which in February 2009 reached 6.4%, has risen approximately 80% from February 2008. Similarly, CHAIT's delinquency rate, a harbinger of near-term charge-offs, is also rapidly rising and hit an all-time high in February 2009 at 4.6%. Moreover, CHAIT's principal payment rate has fallen by approximately two-and-a-half percentage points from a year ago. The principal payment rate is a measure of cardholders' willingness and ability to repay their credit card balances. It is also a measure of the speed by which securitized investors will be repaid if an amortization event is triggered. Therefore, a drop in this rate may have negative consequences for securitized noteholders.

CHAMT's performance trends have followed a similar trajectory. The trust's charge-off rate reached 6.4% in February, and the delinquency rate climbed to 4.6%, both record highs except for the spike in charge-offs following the 2005 bankruptcy law change. Furthermore, CHAMT's principal payment rate has fallen by approximately 2.75 percentage points from a year ago.

Given the context of a worsening economic environment and continued downward pressure on key performance metrics, Moody's has recently revised its expectations for both Trusts. For CHAIT, we raised the expected range for charge-offs to 7.5%-9.5% from 5.0%-7.0%, and revised downward our expected range for the principal payment rate range to 15.0%-18.0% from 16.5%-19.5%. We also lowered our range for CHAIT's yield to 13.0%-16.0% from 14.0%-17.0%.

Similarly, for CHAMT, we raised the expected range charge-offs to 7.5%-9.5% from 5.0%-7.0%, and revised downward our expected range for the principal payment rate to 13.0%-16.0% from 15.0%-18.0%. Finally, we lowered our range for CHAMT's yield to 12.5%-15.5% from 14.0%-17.0%.

Moody's review will focus on Chase's ability to address and mitigate the risk of further deterioration in trust performance. At the conclusion of the review, which is typically no longer than 90 days, Moody's may downgrade the notes. A downgrade, if any, is not likely to exceed two notches.

The complete rating actions are as follows:

UNDER REVIEW FOR POSSIBLE DOWNGRADE

Issuer: Chase Issuance Trust:

$300,000,000 Class B CHASEseries Notes, Series 2004-2, A2 Placed on Review for Possible Downgrade; previously on August 17, 2004 assigned A2

$400,000,000 Class B CHASEseries Notes,, Series 2006-1, A2 Placed on Review for Possible Downgrade; previously on February 28, 2006 assigned A2

$350,000,000 Class B CHASEseries Notes, Series 2006-2, A2 Placed on Review for Possible Downgrade; previously on August 29, 2006 assigned A2

$515,000,000 Class B CHASEseries Notes, Series 2007-1, A2 Placed on Review for Possible Downgrade; previously on February 21, 2007 assigned A2

$250,000,000 Class B CHASEseries Notes, Series 2008-1, A2 Placed on Review for Possible Downgrade; previously on June 16, 2008 assigned A2

$700,000,000 Class B CHASEseries Notes, Series 2008-2, A2 Placed on Review for Possible Downgrade; previously on August 27, 2008 assigned A2

$400,000,000 Class C CHASEseries Notes, Series 2003-3, Baa2 Placed on Review for Possible Downgrade; previously on June 18, 2003 assigned Baa2

$165,000,000 Class C CHASEseries Notes, Series 2004-2, Baa2 Placed on Review for Possible Downgrade; previously on June 30, 2004 assigned Baa2

$200,000,000 Class C CHASEseries Notes, Series 2004-3, Baa2 Placed on Review for Possible Downgrade; previously on November 9, 2004 assigned Baa2

$425,000,000 Class C CHASEseries Notes, Series 2005-1, Baa2 Placed on Review for Possible Downgrade; previously on March 17, 2005 assigned Baa2

$150,000,000 Class C CHASEseries Notes, Series 2005-2, Baa2 Placed on Review for Possible Downgrade; previously on May 19, 2005 assigned Baa2

$120,000,000 Class C CHASEseries Notes, Series 2005-3, Baa2 Placed on Review for Possible Downgrade; previously on October 6, 2005 assigned Baa2

$300,000,000 Class C CHASEseries Notes, Series 2005-4, Baa2 Placed on Review for Possible Downgrade; previously on November 16, 2005 assigned Baa2

$350,000,000 Class C CHASEseries Notes, Series 2006-2, Baa2 Placed on Review for Possible Downgrade; previously on February 16, 2006 assigned Baa2

$335,000,000 Class C CHASEseries Notes, Series 2006-4, Baa2 Placed on Review for Possible Downgrade; previously on November 28, 2006 assigned Baa2

$405,000,000 Class C CHASEseries Notes, Series 2007-1, Baa2 Placed on Review for Possible Downgrade; previously on February 21, 2007 assigned Baa2

$250,000,000 Class C CHASEseries Notes, Series 2008-2, Baa2 Placed on Review for Possible Downgrade; previously on May 19, 2008 assigned Baa2

$250,000,000 Class C CHASEseries Notes, Series 2008-3, Baa2 Placed on Review for Possible Downgrade; previously on June 16, 2008 assigned Baa2

$425,000,000 Class C CHASEseries Notes, Series 2009-1, Baa2 Placed on Review for Possible Downgrade; previously on March 13, 2009 assigned Baa2

Issuer: Chase Credit Card Master Trust:

$50,750,000 Class B Notes, Series 2003-4, A1 Placed on Review for Possible Downgrade; previously on March 16, 2007 upgraded to A1

$65,250,000 Class C Notes, Series 2003-4, Baa1 Placed on Review for Possible Downgrade; previously on March 16, 2007 upgraded to Baa1

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

Chase, based in Wilmington, Delaware, reported total assets of $86.8 billion as of September 30, 2008. Chase's long-term bank deposits are rated Aa1 and its Bank Financial Strength rating is C-. The rating outlook on all ratings is negative.

For more information please visit www.Moodys.com

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

New York
Matias Langer
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's places subordinate classes of Chase credit card receivables-backed securities on review for possible downgrade
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