Fitch Affirms CARDS II Trust's Ratings

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the ratings assigned to CARDS II Trust. The Rating Outlook remains Stable. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmations are based on the performance of the Trust, which was in line with expectations. The Stable Outlook indicates that Fitch expects the ratings will remain stable for the next one-to-two years.

The current 12-month average gross yield is 22.79% as of the September 2016 reporting period, slightly higher than the 12-month average of 22.65% as of the September 2015 reporting period.

Monthly payment rate (MPR), a measure of how quickly consumers pay off their credit card debts, has remained relatively stable over the past year. The 12-month average is 37.34% as of the September 2016 reporting period, slightly lower than the 12-month average of 37.48% the previous year.

Net charge-offs have again experienced a slight increase over the past year. As of the September 2016 reporting period, the 12-month average is 3.28%, compared to the 12-month average of 3.12% as of the September 2015 reporting period. Twelve-month averages for 60+ day delinquencies also increased to 1.27% from 1.13% over the same period.

Fitch runs cash flow breakeven analysis by applying stress scenarios to three-, six-, and 12-month performance averages to evaluate the breakeven loss multiples at different rating levels given the available credit enhancement. The performance variables that Fitch stresses are the gross yield, MPR, gross charge-off, and purchase rates. As part of its ongoing surveillance efforts, Fitch will continue to monitor the performance of CARDS II Trust.

Criteria Variation

Eligible Investment: Under the Counterparty Criteria for Structured Finance and Covered Bonds, dated Sept. 1, 2016, Fitch looks to its own ratings in analysing counterparty risk and assessing a counterparty's creditworthiness. The definition of permitted investments for this deal allows for the possibility of using investments not rated by Fitch, which represents a criteria variation. Since the only available funds to invest are monthly collections, and the funds can only be invested for a short duration of one month given the payment frequency of the notes, Fitch doesn't believe such variation has a measurable impact upon the current ratings assigned.

RATING SENSITIVITIES

Fitch models three different scenarios when evaluating the rating sensitivity compared to expected performance for credit card asset-backed securities transactions: 1) increased defaults, 2) a reduction in purchase rate, and 3) a combination stress of higher defaults and lower MPR.

Rating sensitivity to increasing defaults alone as well as reducing purchase rate alone both have the least impact on rating migration, with possible downgrades on the class A notes under the severe scenarios of increasing defaults by 75% and possible downgrades on the class A notes when decreasing purchase rate by 100%. The harshest scenario assumes stresses to defaults and MPR to occur simultaneously. Ratings on class A would be downgraded under the moderate stress of a 50% increase in defaults and a 25% reduction in MPR; however, the severe stress could lead to more drastic downgrades to all classes. To date, the transactions have exhibited strong performance with all performance metrics within Fitch's initial expectations. For further discussion of sensitivity analysis, please see the new issue report related to one of the transactions listed below.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following ratings:

CARDS II Trust, Series 2015-1

--Class A asset-backed notes at 'AAAsf'; Outlook Stable;

--Class B asset-backed notes at 'BBBsf'; Outlook Stable.

CARDS II Trust, Series 2015-2

--Class A asset-backed notes at 'AAAsf'; Outlook Stable;

--Class B asset-backed notes at 'BBBsf'; Outlook Stable.

CARDS II Trust, Series 2015-3

--Class A asset-backed notes at 'AAAsf'; Outlook Stable;

--Class B asset-backed notes at 'BBBsf'; Outlook Stable.

CARDS II Trust, Series 2016-1

--Class A asset-backed notes at 'AAAsf'; Outlook Stable;

--Class B asset-backed notes at 'BBBsf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 26 Oct 2016)

https://www.fitchratings.com/site/re/888492

Global Credit Card ABS Rating Criteria (pub. 21 Jul 2016)

https://www.fitchratings.com/site/re/885146

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014647

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014647

Endorsement Policy

https://www.fitchratings.com/regulatory

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Copyright (c) 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20161110006604/en/

Fitch Ratings
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Harry Kohl
Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
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Senior Director
+1 212-908-9156
or
Media Relations
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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