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Rating Action:

Moody's upgrades CARDS II Trust's credit card receivables-backed notes

11 Apr 2011

$366 million of Asset-Backed Securities affected

Toronto, April 11, 2011 -- Moody's has upgraded 12 subordinated classes of asset-backed securities across nine Series issued out of CARDS II Trust (the "Trust"). These notes are backed by a revolving pool of unsecured credit card receivables originated and serviced by Canadian Imperial Bank of Commerce (CIBC) (Aa2/P-1).

RATINGS RATIONALE

The upgrade actions are primarily driven by the improvement in the collateral performance of the pool of credit card receivables which back the issued notes. The net charge-off rate (monthly, annualized) has declined meaningfully over the last twelve months, declining to 5.0% in January 2011 from 6.3% a year earlier and from the Trust's charge-off rate peak of 7.3% in May 2009. Similarly, the Trust has experienced a decline in the delinquency rate, at 2.5% in January 2010 compared to 2.9% a year ago. Other key performance metrics including the monthly payment rate and the portfolio yield have remained stable and further support these ratings actions. The Trust's payment rate, a measure of the willingness and ability of cardholders to repay their credit card debt, remained stable throughout the recent economic recession. For example, in 2008 and 2009 the payment rate averaged 39.4% and 37.1%, respectively. In 2010, the average payment rate was 38.0%. In addition, Trust yield has improved modestly, averaging 22.0% in 2010 as compared to 20.0% in 2009.

The improvement in the Trust's collateral performance is consistent with general Canadian industry trends and also with Moody's Canadian Credit Card Index performance. Given the improving unemployment rate and the moderation in the number of bankruptcy filings, two key drivers of credit card performance, Moody's revised the outlook on the Canadian credit card ABS sector to stable from negative in October 2010. In addition, meaningful improvements in charge-offs and delinquency rates in Moody's Canadian Credit Card Index have been evident throughout 2010. For example, the Index charge-off rate for Q4, 2010 was 3.38% vs. 4.83% for Q4 2009. Moody's expects loss levels will remain stable and may improve further, although at a more moderate pace, for both the industry and the Trust.

Moody's expects performance in the range of 4.0%-6.0% for net charge-offs, 20.0%-23.0% for yield and 34.0%-38.0% for the 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 the transaction was "Moody's Approach To Rating Credit Card Receivables-Backed Securities", published April 16, 2007.

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.

Complete Rating Actions:

Series 2005-2

$17,391,305 Floating Rate Credit Card Receivables-Backed Class B Notes, Upgraded to A1 (sf); previously affirmed on July 22, 2009, A2 (sf)

$17,391,305 Floating Rate Credit Card Receivables-Backed Class C Notes, Upgraded to Baa1 (sf); previously affirmed on July 22, 2009, Baa2 (sf)

Series 2006-1

$10,869,566 Floating Rate Credit Card Receivables-Backed Class B Notes, Upgraded to A1 (sf); previously affirmed on July 22, 2009, A2 (sf)

$10,869,566 Floating Rate Credit Card Receivables-Backed Class C Notes, Upgraded to Baa1 (sf); previously affirmed on July 22, 2009, Baa2 (sf)

Series 2006-2

$4,347,827 Floating Rate Credit Card Receivables-Backed Class B Notes, Upgraded to A1 (sf); previously affirmed on July 22, 2009, A2 (sf)

$4,347,827 Floating Rate Credit Card Receivables-Backed Class C Notes, Upgraded to Baa1 (sf); previously affirmed on July 22, 2009, Baa2 (sf)

Series 2010-1

$29,694,000 Floating Rate Credit Card Receivables Backed Class B Notes, Upgraded to Baa1 (sf); previously assigned on May 21, 2010, Baa2 (sf)

Series 2010-2

$62,534,000, 5.248%, Credit Card Receivables Backed Fixed Rate Class B Notes, Upgraded to Baa1 (sf); previously assigned on May 21, 2010, Baa2 (sf)

Series 2010-3

$46,901,000, 4.746%, Credit Card Receivable-Backed Class B Notes, Upgraded to Baa1 (sf); previously assigned on August 24, 2010, Baa2 (sf)

Series 2011-1

$57,103,000 Floating Rate Credit Card Receivables-Backed Class B Notes, Upgraded to Baa1 (sf); previously assigned on January 11, 2011, Baa2 (sf)

Series 2011-2

$57,103,000 Floating Rate Credit Card Receivables-Backed Class B Notes, Upgraded to Baa1 (sf); previously assigned on January 11, 2011, Baa2 (sf)

Series 2011-3

$57,103,000 Floating Rate Credit Card Receivables-Backed Class B Notes, Upgraded to Baa1 (sf); previously assigned on January 11, 2011, Baa2 (sf)

The seller/servicer for Cards II Trust is Canadian Imperial Bank of Commerce (CIBC) (Aa2/P-1). CIBC is the largest credit card originator in Canada. CIBC, headquartered in Toronto, Canada, is rated B- for bank financial strength and Aa2 for long-term deposits. The rating outlook on CIBC and its subsidiaries is negative. The last CIBC rating action was on December 4, 2008 when Moody's affirmed CIBC's ratings and maintained its negative outlook.

REGULATORY DISCLOSURES

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.

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.

Toronto
Michael Buzanis
VP - Senior Credit Officer
Structured Finance Group
Moody's Canada Inc.
(416) 214-1635

New York
Luisa De Gaetano
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635

Moody's upgrades CARDS II Trust's credit card receivables-backed notes
No Related Data.
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