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Announcement:

Moody's ratings on Capital One's credit card ABS remain under review for possible downgrade

04 Nov 2010

New York, November 04, 2010 -- Following the November 1 downgrade of Capital One Bank's long-term senior unsecured rating to A3 from A2, Moody's ratings on 47 classes of asset-backed securities issued out of the Capital One Multi-asset Execution Trust ("COMET") remain under review for possible downgrade. Moody's has also extended its review of the Counterparty Instrument Rating to the Swap Agreement relating to credit card backed notes issued by COMET Class C(2004-3) (the "Counterparty Rating"). The COMET securities are backed by a $42 billion revolving pool of consumer and small business credit card receivables originated by Capital One Bank (USA), N.A. ("Capital One Bank"). These securities were initially placed under review for possible downgrade on July 28, 2010.

RATIONALE FOR MAINTAINING THE REVIEW STATUS

The one-notch downgrade to A3 of Capital One Bank, the seller/servicer for COMET, is, in and of itself, a credit negative for the COMET securities. Even so, COMET's collateral performance trends, like those of the credit card industry at large, have improved and appear to be on a positive credit trajectory. Our continued review will focus on the strength of these positive credit trends combined with the impact of the downgrade to the seller/servicer.

The financial strength of the seller/servicer 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. This linkage also reflects the ongoing role of a seller/servicer in card ABS programs (e.g. underwriting, risk management, and servicing). Therefore, although it does not necessarily translate to a downgrade of the ABS, a downgrade of a bank sponsor's credit rating increases the potential for ratings volatility for the related card ABS program.

Like others in the credit card sector, Capital One's trust performance materially deteriorated during the credit crisis. Unlike most others, however, Capital One chose not to increase the credit enhancement to its ABS notes. As a result, Moody's downgraded the two most junior classes of notes in 2009. The ratings on the more senior Class A and Class B notes, though marginally weaker, remained unchanged.

Since then, concerns about collateral performance have abated somewhat. For COMET, charge-offs have fallen from a peak of 12.7% in March 2010 to 10.4% in September 2010. Even so, looking back at the extreme and rapid deterioration in collateral performance during the height of the credit crisis, we remain cautious about the relatively recent improvement. For these reasons, and in light of the downgrade of the sponsor bank, the COMET ratings remain under pressure. A downgrade, if any, would not likely be more than two notches.

COUNTERPARTY RATING

The Counterparty Instrument Rating is based upon the pari passu ranking of swap payments relative to the payments to the COMET Class C(2004-3) noteholders in the transaction waterfall. Consequently, in the ordinary course of events, the ability of COMET to honor its obligations to make the swap payments is considered equal to its ability to make the scheduled payments on the underlying notes. The ratings history of the Swap is highly correlated to the ratings history of the related COMET Class C(2004-3) notes. As a result, given the extension of the review status on COMET Class C(2004-3) Ba1 rating, so is the Counterparty Instrument Rating.

COLLATERAL PERFORMANCE EXPECTATIONS

Moody's performance expectations for COMET are unchanged. The current expected range for the gross charge-off rate is 9.5%-12.5%, for the principal payment rate is 14%-17%, and for the yield is 20%-23%. Performance of these metrics has been generally inside these ranges over the past 18 months.

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 principal methodology used in rating COMET and the Counterparty Rating was Moody's Approach to Rating Credit Card Receivables-Backed Securities rating methodology published in April 2007 and the "Framework for De-Linking Hedge Counterparty Risks from Global Structured Finance Cashflow Transactions Moody's Methodology", published in October 2010. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

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.

New York
William Black
MD - Structured Finance
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 Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's ratings on Capital One's credit card ABS remain under review for possible downgrade
No Related Data.
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