S&P Global Ratings recently completed a review of the U.S. and Canadian credit card master trusts and outstanding credit card asset-backed securities (ABS) it rates. The review yielded two upgrades and 126 affirmations on 128 classes from 10 U.S. and four Canadian originators. The transactions are from eight U.S. bankcard, four Canadian bankcard, and four U.S. private-label card master trusts (see "Two Ratings Raised, 126 Ratings Affirmed On 16 U.S. And Canadian Credit Card ABS Trusts," published Jan. 29, 2021, and tables 1 and 6 below).

We expect stable to marginal deterioration in U.S. and Canadian credit card ABS collateral performance over the next 12-24 months as forbearance periods end and charge-offs begin to be recognized. Elevated unemployment levels could also hurt credit card collateral performance if labor markets do not return to normalcy within the next 12-24 months. Still, despite potential emerging risk to collateral performance, our base-case and stressed rating assumptions reflect our view of the transactions' expected performance during multiple economic scenarios and forecasted economic variables such as unemployment levels and bankruptcy rates (see tables 3-5 below).

Receivables collateralizing credit card ABS master trusts generally declined in 2020 as consumer spending decreased due to pandemic-related economic restrictions. The three-month average principal receivables declined year over year by 21.26% to $137.08 billion for U.S. bankcard, 12.65% to $45.39 billion Canadian bankcard, and 1.14% to $32.05 billion for U.S. private-label cards as of November 2020. However, credit card ABS receivables continue to demonstrate strong credit metrics such as high seasoning, strong credit scores, and geographic diversification.

On average, approximately 97%, 67%, and 84% of bankcard, retail private-label, and Canadian trust receivables, respectively, are from accounts aged at least five years. About 66% of bankcard receivables are from accounts with FICO scores of at least 720 and only 10% have FICO scores of 660 and below. Retail private-label trusts, which tend to have a weaker credit profile, had 60% of receivables with FICO scores above 720 and 10% with FICO scores less than 660. Canadian trusts generally have high quality obligors, with approximately 70% and 85% of receivables associated with cardholders with FICO scores above 700 and 660, respectively. These overall strong credit metrics, coupled with originators' forbearance programs and government assistance programs, which benefitted obligors at the lower end of the credit spectrum, were instrumental to U.S and Canadian credit card ABS performance remaining strong, despite the market dislocation in 2020.

As part of our assessment, we reviewed key credit variables (credit balance, credit limits, credit scores, geographic distribution, account age, delinquency, and dilution) and key performance variables (yield, charge-off/loss rate, and payment rate) over multiple economic cycles. In addition to reviewing each originator's management experience, consistency of underwriting, account management, and servicing standards, we also performed peer and sensitivity analyses to potential shifts in pool composition from changes in co-brand or merchant partner relationships.

We also consider adverse scenarios, such as insolvency of retail partners and the removal of receivables from the trust. Our charge-off (loss rate) assumptions are generally above the trusts' current performance, and our payment rate and yield assumptions are generally below the trusts' current performance. As such, given our current macroeconomic outlooks for the U.S. and Canada, we believe our assumptions continue to adequately capture the risks for the credit card ABS receivables and remain relevant.

Our review reflects S&P Global Ratings' forward-looking view of the economy and the credit card sector (see "Global Economic Outlook: Limping Into A Brighter 2021," published Dec. 3, 2020, and "U.S. And Canadian Credit Card ABS Performance Risk Increases As Unemployment Supplements Wane," published Aug. 6, 2020). Based on these analyses, we assessed each program and, where appropriate, updated our base-case assumptions and stresses to the key performance variables we use when rating credit card ABS.

As vaccine rollouts in several countries continue, S&P Global Ratings believes there remains a high degree of uncertainty about the evolution of the coronavirus pandemic and its economic effects. Widespread immunization, which certain countries might achieve by midyear, will help pave the way for a return to more normal levels of social and economic activity. We use this assumption about vaccine timing in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

Table 1

Base-Case And Stress Assumptions

Our base-case assumptions generally reflect our view of the trusts' expected performance during multiple economic scenarios, including the proceeding 18-24 months, based on trust-specific receivables performance trends, trust performance relative to peers, and trust sensitivity to our forecasted economic variables such as unemployment levels and bankruptcy rates (see tables 3-5 below). Our stress assumptions reflect our view of how performance variables could deteriorate from base-case assumptions in an early amortization scenario for the individual trusts (see "U.S. Credit Card Securitizations: Methodology And Assumptions," published Aug. 24, 2017).

We also believe the risks generally inherent in pools that rely on a single partner, or those with multiple partner relationships, include the potential shift in concentrations for each co-branded and non-co-branded program, which could affect the pool's collateral quality and the receivables' performance. To account for this risk, we typically assess the securitization's receivables performance without the benefit of the co-branded relationships and incorporate the potential removal of one or all co-brand portfolios from the pool when determining our base-case assumptions for key performance variables.

All key performance variables (e.g., loss rate, yield, and payment rate) could be affected by a shift in pool composition if a co-branded arrangement is terminated. However, we believe the most significant impact will likely be to payment rates, which reflect how fast obligors pay back their outstanding balances.

Co-branded programs typically include transactors or convenience users (obligors who tend to charge their cards each month to earn rewards and pay down the debt each month), which generally drives overall payment rates higher than pools that include obligors who carry a balance. As a result, we generally apply a higher stress to the actual payment rate performance to arrive at our base-case assumption for co-branded pools relative to pools with no significant rewards-based program. This factors in the possibility that the portion of convenience users in the pool may decline significantly if a co-brand relationship is terminated.

For retail credit card programs, we completed further sensitivity analysis to test the impact of the retail partners' bankruptcies on collateral performance, including the impact of bankrupt partners' liquidated receivables remaining in the pool with deteriorating performance as these receivables run-off.

Yield

Our base-case yield assumptions are generally below the trusts' current performance because most trusts benefit from interchange fees, particularly those with a large number of transactors in the pool. We generally do not consider interchange as revenue in higher rating categories because we believe interchange may not be available to the trusts if the card lender becomes insolvent.

For our stressed yield assumptions, we consider competitive pressures on the trusts and the effect legislation or regulatory actions could have on interest rates and fees. We typically assume yield is compressed at 10%-13% when a trust enters rapid amortization in the 'AAA' stress scenario for bank credit card pools.

Charge-offs/losses

Our base-case charge-off rate assumptions are generally above the trusts' current performance. Our assumptions are forward-looking and incorporate various economic factors, including our economists' unemployment forecast.

We established an annualized peak charge-off rate of 33% at the 'AAA' rating category for the U.S. Credit Card Quality Index (CCQI) benchmark pool. This benchmark peak charge-off rate reflects our view of the U.S. bankcard industry's expected average performance under conditions of extreme economic stress. As a result, reductions in our base case for the charge-off rate will not necessarily decrease the stressed annualized peak charge-off rates.

The base-case and stressed peak charge-off rates vary (higher or lower) for actual securitization trusts, based on a portfolio- and originator-specific analysis. We also considered how an individual trust has performed compared to the benchmark pool and its peers during and after the 2008-2009 recession.

Payment rate

The payment rate is the rate at which obligors pay down their balances each month, and it affects the length of time during which ABS investors may be exposed to the credit risk of a deteriorating asset pool. The higher the payment rate, the more quickly investors can be paid out in adverse scenarios.

Our base-case payment rate assumptions are generally below the trusts' current performance. They take into consideration a reduction in convenience users in the pool during adverse scenarios and the potential removal of co-brand relationships that attract transactors and drive higher payment rates.

Purchase rate

Our purchase rate assumptions consider the utility of the cards and incorporate our credit rating on the originator and our assessment of its ability to continue generating and transferring receivables to the trust.

Securitization Performance

Credit card collateral performance remains stable, benefiting from originators' COVID-19 forbearance and government assistance programs, as well as strong collateral credit quality. Delinquencies and loss rates have generally remained below pre-pandemic levels (e.g., our U.S. CCQI charge-off rate fell to 1.65% in November 2020--the lowest rate in its history).

Trust receivables generally declined in 2020, reflecting an overall decrease in consumer spending due to pandemic-related economic restrictions. Elevated unemployment levels could also hurt credit card collateral performance if labor markets do not return to normalcy within the next 12-24 months. Nevertheless, our base-case and stressed assumptions for credit card charge-offs, payment rate, and yield, which were recalibrated following the 2008-2009 recession and include stress scenarios for bankrupt retailers, continues to adequately reflect each program's risks. Further, credit card originators mitigated some losses over 2020 by offering deferred payment options to borrowers negatively affected by the pandemic. As a result, deferment levels rose through March and peaked in April before declining over the course of the summer to its current (normalized) pre-pandemic lows.

We continue to closely monitor the retail sector as it relates to private-label cards. Our base cases for trusts that include multiple merchants reflect performance simulations that mimic merchant bankruptcy and the termination of relationships (i.e., removal of merchants from trusts). Although we do not explicitly model for the (temporary) closure of retail outlets, which has been the case throughout the pandemic, our simulations effectively incorporate those scenarios. These trusts' performance trends , and the deferment options the originators offered, have broadly been in line with bank cards.

We expect stable to marginal deterioration in U.S. and Canadian credit card ABS performance over the next 12-24 months as forbearance periods end and charge-offs begin to be recognized, though our base-case assumptions take these scenarios into consideration. Where we made changes to our assumptions, these were primarily related to adjustments to payment rate and purchase rate credit, where we considered collateral performance trends over recent years and peer comparisons as we recalibrated our assumptions.

U.S. bankcard

We observed the following U.S. bankcard performance trends as of November 2020 (see "U.S. Credit Card Quality Index: Monthly Performance--November 2020," published Dec. 31, 2020):

• The three-month average principal receivables totaled $137.08 billion, down 21.26% year over year and 1.62% from third-quarter 2020.
• The three-month average charge-off rate was 1.87%, down 16.75% year over year and 14.06% from third-quarter 2020.
• The three-month average 30-plus-day delinquency rate was 1.22%, down 21.21% year over year and 0.15% from third-quarter 2020.
• The three-month average total payment rate was 31.43%, up 7.50% year over year and 3.01% from third-quarter 2020.
• The three-month average yield was 20.37%, down 0.03% year over year and up 2.23% from third-quarter 2020.
• The three-month average excess spread was 15.34%, up 6.12% year over year and 5.15% from third-quarter 2020.

U.S. bank credit card ABS receivables performance has been generally stable since our last shelf review in 2019 (see charts 1 and 4a-6a below). This reflects the originators' pandemic-related forbearance programs, government assistance programs, and collateral credit quality. Limited account additions to master trusts over the past few years have also resulted in stable pool compositions with a high percentage of high credit quality, seasoned accounts in securitized pools, which helped sustain generally low delinquencies and charge-off rates.

Canadian bankcard

We observed the following Canadian bankcard performance trends as of November 2020 (see "Canadian Credit Card Quality Index: Monthly Performance--November 2020," published Jan. 5, 2021):

• The three-month average principal receivables totaled $45.39 billion, down 12.65% year over year and 2.28% from third-quarter 2020.
• The three-month average charge-off rate was 1.96%, down 36.76% year over year and 13.93% from third-quarter 2020.
• The three-month average 30-plus-day delinquency rate was 1.40%, down 28.94% year over year and up 0.44% from third-quarter 2020.
• The three-month average total payment rate was 50.34%, up 10.78% year over year and 3.24% from third-quarter 2020.
• The three-month average yield was 23.84%, up 0.67% year over year and 1.77% from third-quarter 2020.
• The three- month average excess spread was 18.34%, up 7.76% year over year and 4.35% from third-quarter 2020.

The collateral performance of Canadian credit card ABS receivables has generally remained within our expectations since our last shelf review in 2019 (see charts 2 and 4b-6b below). However, we believe elevated household debt levels and higher unemployment levels make unsecured Canadian consumers more susceptible to performance deterioration. Our base-case assumptions incorporate these factors and expectations.

U.S. private-label cards

We observed the following in U.S. private-label performance trends as of November 2020 (see "U.S. Credit Card Quality Index: Monthly Performance--November 2020," published Dec. 31, 2020):

• The three-month average principal receivables totaled $32.05 billion, down 1.14% year over year and 5.61% from third-quarter 2020.
• The three-month average charge-off rate was 3.31%, down 32.81% year over year and 15.25% from third-quarter 2020.
• The three-month average 30-plus-day delinquency rate was 2.47%, down 31.24% year over year and up 9.07% from third-quarter 2020.
• The three-month average total payment rate was 19.13%, up 0.02% year over year and down 4.10% from third-quarter 2020.
• The three-month average yield was 26.61%, down 0.19% year over year and up 2.97% from third-quarter 2020.
• The three- month average excess spread was 19.55%, up 12.85 year over year and 8.19% from third-quarter 2020.

While pandemic-related restrictions have hurt individual merchants, overall private-label credit card ABS performance has remained stable (see charts 3 and 4c-6c below). This is reflected in our base-case assumptions, which consider both the impact of the termination of merchant relationships and the bankruptcy of any given merchant. We forecast asset quality will remain stable even as asset quality deteriorates slightly in the near term, offset by the trusts' receivables overall highly seasoned state.

U.S. Bankcard

American Express Credit Account Master Trust

Contacts: Trang Luu and Mayan Abraham

American Express Credit Account Master Trust (AECAMT) issues certificates through discrete series, each representing an undivided interest in the trust. The trust's primary assets are receivables in designated consumer American Express credit card accounts and "pay over time" revolving credit features associated with charge card accounts originated by American Express National Bank.

Structural features

Each discrete series has a senior/subordinated structure. The class A certificates benefit from the subordination of the class B certificates and the collateral interest. The class B certificates benefit from the subordination of the collateral interest. However, the amount of credit enhancement available for each class varies by series (see table 6).

Collateral overview

AECAMT's collateral pool consists of credit card receivables generated by designated accounts, including multiple co-branding arrangements with various services companies. The largest co-branding arrangement in the trust is Delta Air Lines Inc., which comprised approximately 24.4% of the trust portfolio as of July 2019.

The trust portfolio comprises highly seasoned prime accounts, in our view. Accounts aged 60 months or more generate 91.3% of the receivables, and the average credit limit and average balance have been relatively consistent over the past several years. Since our last shelf review, account balances in the above $10,000 buckets have remained stable at about 56.4%, while accounts with credit limits over $20,000, including no preset spending limits, have increased slightly to 71.8%.

We believe these percentages reflect the high concentration of highly seasoned accounts, which tend to have high credit lines and balances. In addition, receivables with FICO scores greater than 760 have generally increased during the past several years, while those with FICO scores less than 660 have generally declined. As of August 2020, receivables with FICO scores greater than 700 represent approximately 81.3% of the total trust, including approximately 44.9% with FICO scores of 760 and greater, while FICO scores below 660 made up about 6.8%.

Loss rate

Our base-case loss assumption for AECAMT is 4.75%. AECAMT's losses have consistently been lower than the industry average measured by S&P Global Ratings' U.S. Bankcard CCQI, with an average net loss rate of 1.8% for the first 11 months of 2020 (see chart 5a). Our 30.0% stressed annualized peak loss assumption for this pool is lower than the 33.0% floor we established for a benchmark pool in an extreme economic scenario for a 'AAA' rating. The lower stress we apply reflects our view that this pool could perform better than the benchmark pool during a downturn, based on our observation of lower and more stable losses in this pool than those of the benchmark pool during the Great Recession.

Yield

Our base-case yield assumption for the pool is 18.0%. Total trust yield over the past few years has been consistently in the 22.0%-24.0% range, tracking marginally above the U.S. Bankcard CCQI (see chart 4a). This portfolio contains spend-centric obligors and high interchange.

While we do not consider interchange in this portfolio, we do consider fewer convenience users in an amortization stress scenario, which would likely increase the portfolio's yield. Similar to other pools that include seasoned high-quality prime cardholders, we also believe AECAMT is less likely to experience a sharp increase in delinquencies. This resulted in less volatility in stressed yield compared with pools that include a higher portion of nonprime accounts.

Our 'AAA' stressed yield is 11.0%, which is 61.11% of the base case. The slightly smaller haircut applied to the trust yield, relative to the general range of stresses in our criteria, reflects our cash flow yield input, which typically assumes 10.0%-13.0% in the 'AAA' stress level, and our view that applying a higher haircut would result in an input outside that range. Our typical yield input range of 10.0%-13.0% at the 'AAA' stress level reflects our view that yield will immediately decline in an amortization scenario due to competitive pressures, low introductory and promotional rates, and restrictive pricing regulations.

Payment rate

Our base-case total payment rate assumption for the pool is 25.0%. The total trust payment rate has generally been in the mid-30% area over the past several years, consistently tracking above the U.S. Bankcard CCQI (see chart 6a). Our lower base-case assumption relative to the pool's performance reflects our view of the company's reliance on co-brand relationships and incorporates the potential removal of one or all co-brand portfolios from the pool.

Co-branded cards typically attract convenience users who likely drive high payment rates. The payment rate could decline if the program contracts are not renewed upon an amortization stress scenario. We also assume the number of convenience users would decline before the first month of an amortization scenario and payment rates would likely experience a significant drop. As of August 2020, approximately 61.2% of obligors had paid down their balances in full each month.

BA Credit Card Trust

Contacts: Trang Luu and Stefan Bratic

BA Credit Card Trust's (BACCT) BAseries is secured by a collateral certificate, series 2001-D, issued by BA Master Credit Card Trust II (the master trust). The collateral certificate represents an undivided interest in the master trust assets, which are receivables from a portfolio of unsecured consumer revolving credit card accounts owned by Bank of America N.A. In the BAseries, delinked tranches can be issued if certain issuance conditions are met, including sufficient subordination to provide the required credit support.

Structural features

The class A notes benefit from the subordination of the class B and C notes, as well as a class D certificate. Based on the capital structure, the class B and C notes and the class D certificate provide 31.75% credit support to the class A notes. However, under the payment structure, the available finance charge collection will be used to fund the class C reserve account before covering the class D investor defaults if the trust breaches the excess spread trapping trigger. This may result in insufficient excess spread being available to cover the class D investor default amount, which could cause the entire class D certificate balance to be written-down during the revolving period.

In our 'AAA' rating scenario, we assume the class D certificate amount will be fully written down and unavailable as credit enhancement for the class A notes. We also assume that only the 21.25% credit support the class B and C notes provide will be available as credit enhancement for the class A notes.

Collateral overview

We believe the receivables in this portfolio are geographically diverse and are from well-seasoned, prime accounts. The average credit limit and average balance have been relatively stable during the past several years. As of September 2020, all receivables were generated by accounts older than 60 months. Receivables generated from obligors with FICO scores greater than 720 have generally increased during the past several years, while those FICO scores less than 660 have declined. FICO scores greater than 720 represent 65.6% of the total trust as of September 2020, while FICO scores below 660 account for about 8.2%.

Loss rate

Our base-case loss assumption for BACCT is 6.5%. Losses have declined over the past year, closely tracking the industry average measured by the U.S. Bankcard CCQI (see chart 5a). Our 38.25% 'AAA' stressed annualized peak loss assumption for this pool is higher than the 33.0% floor we established for a benchmark pool in an extreme economic scenario for a 'AAA' rating. The higher stress we apply reflects our view that this pool could perform weaker than the benchmark pool during a downturn, based on our observation of higher and more volatile losses than those of the benchmark pool during the Great Recession.

Yield

Our base-case yield assumption for the pool is 15.0%. Total yield is in the 15.0%-17.0% range, which is about three to four percentage points lower than the U.S. Bankcard CCQI (see chart 4a). Yield is relatively low because of the high credit quality of the obligors. Our 'AAA' stressed yield is 10.0%, which is 66.67% of the base case. Like other pools that include seasoned high-quality prime cardholders, we believe this pool is less likely to experience a sharp increase in delinquencies. This resulted in less volatility in stressed yield compared with pools that include a higher portion of nonprime accounts. As a result, the haircut applied to this trust's yield is lower, relative to the general range of stresses we publish in our criteria (see "U.S. Credit Card Securitizations: Methodology And Assumptions," published Aug. 24, 2017). We also consider the effect legislation or regulatory actions could have on interest rates, fees, and competitive pressures, which could also result in yield in the 10.0%-13.0% range.

Payment rate

Our base-case total payment rate assumption for the pool is 13.0%. Total payment rates increased steadily over the past two years to an 11-month average of about 19.9% as of November 2020 from 14.6% in 2010 (see chart 6a). As of September 2020, about 18.6% of the obligors in the pool paid their balances in full each month. The trust's proportion of full payers is lower relative to its peers', and its payment rate is lower than those of the U.S. Bankcard CCQI and other bankcard pools. Our base case of 13.0% is relatively close to the actual trust performance because we believe a payment rate driven by obligors who carry a balance would be more stable in a downturn scenario than one driven by convenience users.

Barclays Dryrock Issuance Trust

Contacts: Trang Luu and Mingzhuo Zhang

Barclays Dryrock Issuance Trust (Dryrock), established in 2012, issues discrete series of notes backed by U.S. credit card receivables originated and serviced by Barclays Bank Delaware. Most of the receivables in this trust are co-branded with multiple partners, such as Apple Inc., American Airlines Inc., and Upromise.

Structural features

Each series has a senior/subordinated structure consisting of a class A and B note. The class B notes provide 18.0% credit support (of the total capital structure) for series with fixed-rate coupons and 21.0% credit support for series with floating-rate coupons.

Collateral overview

Overall, we believe the pool is geographically diverse and its FICO score composition is similar to other bankcard pools included in the U.S. Bankcard CCQI. However, the pool includes less-seasoned (younger) accounts and lower credit lines than the average bank credit card pools in the U.S. Bankcard CCQI. We believe less-seasoned accounts have more uncertain payment behaviors and are more likely to have higher defaults than more-seasoned accounts. Although the lower credit lines somewhat mitigate the higher severity of defaults, we believe the pool's performance may be more unpredictable because the accounts are younger than those in highly seasoned pools. Our base-case assumptions incorporate these factors and expectations.

As of November 2020, about 90.8% of the accounts in the trust (91.8% of receivables) were co-branded with 18 different partners. The trust also includes accounts that are not co-branded. The three largest partners, which each representing more than 10% of the total outstanding receivables, are American Airlines, Upromise, and Apple. As of November 2020, the trust had a weighted average age of approximately 112 months, an average principal receivables balance of approximately $1,674, an average credit limit of approximately $11,411, and an average utilization rate of 14.9%. Accounts older than 60 months generated about 85.5% of the receivables. Of the receivables, 58.7% were from obligors with FICO scores higher than 720 and 40.1% were from obligors with FICO scores higher than 750.

Loss rate

Our base-case loss assumption for Dryrock is 7.0%. As of the 11 months ended November 2020, net losses for the trust portfolio averaged about 3.6%, which is higher than the 2.3% for the U.S. Bankcard CCQI (see chart 5a). Our 37.0% 'AAA' stressed annualized peak loss assumption for this pool is higher than the 33.0% floor we established for a benchmark pool in an extreme economic scenario for a 'AAA' rating. The higher stress reflects our view that this pool's loss rates could be less predictable in a stress scenario due to the relatively less-seasoned accounts; the shorter performance history of the trust and certain partners, compared with other pools in the U.S. Bankcard CCQI; and the potential shift in the pool composition, which could affect pool performance and credit quality.

Yield

Our base-case yield assumption for Dryrock is 16.75%. The yield for the trust portfolio is slightly above the yield for the U.S. Bankcard CCQI (see chart 4a). Our stress assumption of 11.00% for the trust at the 'AAA' rating level is 65.67% of our base-case assumption of 16.75%. The smaller haircut for Dryrock (relative to the sample haircut ranges listed in our criteria) reflects our assumption that the pool is less likely to experience a sharp increase in delinquencies in a downturn due to the relatively high credit quality of the cardholders in the trust. This resulted in less volatility in stressed yield compared with pools that include a high portion of nonprime accounts. We also considered the effect legislation or regulatory actions could have on interest rates, fees, and competitive pressures, which could also result in yield in the 10.0%-13.0% range.

Payment rate

Our base-case payment rate assumption is 18.0%. For the past two years, the trust's payment rate has been tracking consistently below the U.S. Bankcard CCQI, averaging 26.2% for the 11 months ended November 2020 (see chart 6a). We consider the diversification of the co-branded programs in this pool a positive factor in our base-case assumption. A pool that relies on multiple relationships is less likely to lose all of its programs simultaneously than a pool that relies on only one relationship.

Still, our base-case assumption is lower than the trust's and approved portfolio's performance. This reflects hypothetical scenarios in which we remove one or more partners to reflect our view of the accounts' reliance on co-branded relationships, which typically attract convenience users who are likely to pay down all or most of their outstanding balances each month. In November 2020, 20.0% of accounts paid off the prior month's outstanding balance in full. In our stress scenarios, consistent with our criteria, we assume that the number of convenience users in the pool will decline before the amortization period begins and the portion of revolving accounts (users who carry over some of their debt to subsequent months) will increase, which could result in a significant drop in payment rates.

Capital One Multi-Asset Execution Trust

Contacts: Trang Luu and Mayan Abraham

Capital One Multi-Asset Execution Trust (COMET) is secured by a collateral certificate, series 2002-CC, issued by Capital One Master Trust (the master trust). The collateral certificate represents an undivided interest in the master trust assets, which are receivables from a portfolio of unsecured consumer revolving credit card accounts owned by Capital One Bank (USA) N.A. (Capital One) or an affiliate. COMET is a delinked trust in which delinked tranches can be issued if certain issuance conditions are met, including sufficient subordination to provide the required credit support.

Structural features

The card series issues four classes of notes: A, B, C, and D. Classes B, C, and D are subordinated to class A and are part of the credit enhancement structure. The class B, C, and D note issuances are independent of the class A note issuance. However, COMET cannot issue additional securities if the required credit enhancement for that class (classes B, C, and D for class A; classes C and D for class B; and class D for class C) is insufficient. The required amount of credit enhancement for the class A, B, C, and D notes is 21.0%, 12.0%, 3.0%, and 0.0%, respectively.

Collateral overview

We believe the receivables generated by accounts designated to the master trust reflect a well-seasoned, geographically diverse prime portfolio. Similar to COMET's bank credit card peer pools, a significant percentage of the accounts in the pool have high FICO scores and long performance histories, and approximately 30% of accountholders pay their balances in full each month. Although account balances and credit limits have generally remained stable since our last review, balances and credit limits were higher in 2020 and 2019 versus in 2007, with an uptick in accounts with credit limits greater than $10,000.

We believe the increase in balances and credit limits is attributable to the high concentration of mature accounts, which tend to have high credit limits and balances, and fewer newly originated accounts, which typically start with lower limits and balances. We consider the performance of mature accounts to be more predictable than that of newly originated accounts.

Loss rate

Our base-case loss assumption for COMET is 5.5%. COMET's net losses, on average, remain in line with those of the industry average measured by the U.S. Bankcard CCQI (see chart 5a). Our 'AAA' stressed annualized peak loss assumption for this pool is equal to the 33.0% floor we established for a benchmark pool because we believe it will perform similar to the benchmark pool in an extreme economic scenario.

Yield

Our base-case yield assumption for the pool is 18.0%. During the 2008-2009 economic downturn, average yield declined to 18.1% in 2009 from more than 20.0% in 2007. It then increased to 19.6% in 2011 and has remained at around 22.0% since 2018. We believe the increase resulted from asset repricing in anticipation of the Credit Card Accountability, Responsibility, and Disclosure Act (the CARD act), which took effect in 2009.

COMET's receivables have generally generated yields that are slightly higher than yields for the U.S. Bankcard CCQI (see chart 4a). However, from February 2009 through July 2011, the trust's yield was temporarily lower than that of the U.S. Bankcard CCQI because Capital One, unlike many other trust sponsors in the U.S. Bankcard CCQI, chose not to include discount option receivables in its trusts. However, because other issuers have discontinued using discount option receivables, Capital One's yield has again exceeded the U.S. Bankcard CCQI's.

Our stress assumption of 11% for this trust at the 'AAA' rating level is 61.11% of our base-case assumption of 18.0%. The trust yield is relatively low because of the obligors' high credit quality. The smaller haircut for COMET (relative to the sample haircut ranges listed in our criteria) reflect our assumption that COMET's high credit quality, seasoned cardholders are likely to experience smaller increases in delinquencies than nonprime accounts in a downturn. This resulted in less volatility in stressed yield compared with pools that include a high portion of nonprime accounts. We also considered the effect legislation or regulatory actions could have on interest rates, fees, and competitive pressures, which could also result in yield in the 10.0%-13.0% range.

Payment rate

We increased our base-case total payment rate assumption for the pool to 20.0% from 18.0% during this review. The three-month average payment rate declined to 16.0%-17.0% during the 2008-2009 recession, but it has since steadily climbed to the current 33.0%-40.0% (see chart 6a). We also considered the pool's performance against our index, as well as the collateral composition, among other factors. Approximately 30% of the pool receivables were generated from convenience users. Although the portfolio's payment rate has steadily increased, our stress scenarios assume that the number of convenience users in the pool declines before the amortization period's first month and the portion of revolvers increases. Therefore, our 20.0% base-case assumption is well below recent payment rates.

Based on the higher payment rate assumption, which reflects the strength of the trust receivables and actual trust performance, we raised our ratings on the class B notes to 'AA+ (sf)' from 'AA (sf)'.

Chase Issuance Trust

Contacts: Romil Chouhan and Mingzhuo Zhang

Chase Issuance Trust (CHAIT), a Delaware statutory trust, issues CHASEseries notes. The trust was established on April 24, 2002, under the direction of Chase Bank USA (previously Bank One Issuance Trust), as sponsor and depositor. In May 2019, Chase Bank USA merged with JPMorgan Chase Bank, with the latter remaining the surviving entity. Subsequently, JPMorgan Chase Bank assumed and agreed to perform all covenants and obligations of Chase Bank USA as sponsor, originator, administrator, and servicer of the issuing trust. JPMorgan Chase Bank is one of the largest issuers of Visa and Mastercard credit cards in the U.S., and it has been securitizing credit card receivables (as this entity or a predecessor institution) since 1990.

Structural features

CHAIT is structured to issue delinked tranches of notes from a single series if certain issuance conditions are met, including sufficient subordination to provide required credit support levels. The notes are secured by CHAIT's assets, which include credit card receivables from certain revolving credit card accounts owned by JPMorgan Chase Bank USA. There are three classes of CHASEseries notes: classes A, B, and C. The class A notes benefit from the subordination of the class B and C notes, which together provide 14.0% credit support to the class A notes. Credit enhancement for the class B notes is provided by the class C notes, while credit enhancement for the class C notes is provided by the class C reserve account.

Collateral overview

We believe the receivables designated to the trust reflect a geographically diverse portfolio of well-seasoned prime accounts. The average credit limit and balance have been relatively stable for the past several years. As of September 2020, accounts older than 60 months generated 100.0% of the total receivables. In addition, the proportion of receivables with FICO scores greater than 720 has generally increased over the past several years, while the proportion with FICO scores less than 660 has declined. As of September 2020, FICO scores greater than 720 represent about 71.0% of the total trust, while FICO scores below 660 made up about 8.2%. Assuming the pool's collateral composition does not change, we believe the receivables will continue to perform well in 2021.

Loss rate

Our base-case loss assumption for CHAIT is 5.50%. Net losses for CHAIT have been closely tracking the industry average during the past two years as calculated in the U.S. Bankcard CCQI (see chart 5a). The six-month average loss rate for CHAIT peaked at approximately 9.3% in June 2010, which is lower than the 10.1% peak for the U.S. Bankcard CCQI in May 2010. The 'AAA' stressed annualized peak loss assumption of 32.0% for this pool is less than the 33.0% floor we established for a benchmark pool in an extreme recession scenario for a 'AAA' rating because we believe it will perform slightly better than the benchmark pool.

JPMorgan Chase Bank issues several co-branded credit cards whose receivables are part of the CHAIT asset pool. Our analysis and base-case loss assumption incorporate stressed simulations in which the best performers of this group falls out of the pool (these same simulations are applied to our yield and payment rate analyses and assumptions).

Yield

Our base-case yield assumption for the pool is 15.00%. Our 'AAA' stressed yield is 10.00%, which is 66.67% of the base case. The haircut applied to CHAIT's yield is lower (relative to the general range of stresses we publish in our criteria) because our cash flow yield input typically assumes 10.0%-13.0% in the 'AAA' stress level and applying a higher haircut would result in an input well below that range.

Our typical yield input of 10.0%-13.0% at the 'AAA' stress level reflects our view that yield will immediately decline in an amortization scenario due to competitive pressures, low introductory and promotional rates, and restrictive pricing regulations. Similar to other pools that include high-quality prime cardholders, we believe this pool is less likely to experience a sharp increase in delinquencies, resulting in less volatility in stressed yield compared with pools that include a higher portion of nonprime accounts.

Payment rate

We raised our base-case payment rate assumption for the pool to 22.50% from 20.00%. CHAIT's payment rates have steadily risen over the past several years to more than 37.0% in 2020 from an average of approximately 29.0% in 2015 (see chart 6a). Our payment rate adjustment reflects this upward trend, as well as the high credit quality of receivables in the pool, and brings the trust in line with its peers. As of September 2020, convenience users generated 29.1% of the pool's receivables. Convenience usage is typically tied to co-brand relationships, which attract obligors who charge their cards to receive a reward, such as cash or airline miles, and then pay the outstanding balance in full each month. Our stress scenarios assume the number of convenience users in the pool will decline before the amortization period begins and the portion of revolvers will increase, significantly decreasing payment rates. Therefore, our 22.50% base-case assumption is considerably less than the actual monthly payment rates reported.

Citibank Credit Card Issuance Trust

Contacts: Piper Davis and Mayan Abraham

Citibank Credit Card Issuance Trust (CCCIT) is the issuer of the Citiseries class A, B, and C notes. CCCIT's primary asset is an undivided investor interest in Citibank Credit Card Master Trust I's (CCCMTI; the master trust) series 2000 collateral certificate, which is collateralized by credit card receivables from VISA, Mastercard, and American Express revolving credit card accounts that are originated and serviced by Citibank N.A. CCCMTI also issued a series 2009 certificate, which provides additional credit support in the form of structural subordination to Citiseries class A, B, and C notes. The series 2009 certificate's principal amount will generally equal 3.84764% of all outstanding CCCIT notes. CCCIT is a delinked trust in which delinked tranches can be issued if certain issuance conditions are met, including sufficient subordination to provide the required credit support.

Structural features

Citiseries consists of class A, B, and C notes. Classes B and C are subordinated to class A and are part of the credit enhancement structure. The class B and C note issuances are independent of the class A note issuances. However, CCCIT cannot issue additional securities if the required credit enhancement for that class (classes B and C for class A and class C for class B) is insufficient. The credit enhancement currently required for the class A notes is 15.50% of the total capital structure.

Collateral overview

We believe the receivables generated from accounts designated to the master trust reflect a well-seasoned, geographically diversified prime portfolio. The master trust's average credit limit has been steadily increasing over past few years, while the average account balance has declined slightly since 2019. We attributed the increased limits to the substantial concentration of highly seasoned accounts and the infrequent additions of less seasoned accounts. Of the total receivables, 98.7% were older than 60 months as of September 2020. We consider the performance of highly seasoned accounts with longer payment histories to be generally more predictable than newly originated accounts. Receivables with FICO scores greater than 720 have also continued to increase, while those with FICO scores less than 660 have been declining since fourth-quarter 2010. As of September 2020, FICO scores greater than 720 represent about 65.6% of the total trust, with FICO scores 660 and below only represent approximately 8.6%.

Loss rate

Our base-case loss assumption for CCCIT is 6.25%. The 36.00% 'AAA' stressed annualized peak loss assumption we use in our cash flow model for the master trust pool is higher than the 33.00% floor we established for a benchmark pool. We observed that loss rates in this pool have generally remained higher and improved later than those in the U.S. Bankcard CCQI during and after the 2008-2009 recession. Although the pool's loss rate dipped below the unemployment rate starting in late 2010, it declined later and more slowly than what the aggregate bankcard data indicate (see chart 5a).

Yield

Our base-case yield assumption is 15.00%. Our 'AAA' stressed yield is 10.00%, which is 66.67% of the base case. The pool has a large portion of high-quality prime cardholders, in our view. We believe these cardholders will likely experience smaller increases in delinquencies under stress than nonprime accounts, resulting in less volatility in a stressed yield scenario. In addition, pools that include high-quality obligors may be less affected by legislative and regulatory actions because fees and interest rates for prime portfolios are typically lower than those for nonprime customers. In a stressed scenario, we expect a decline in convenience users and an increase in revolvers, who typically generate higher yield, to partly mitigate the decline in yield. In cash flows at the 'AAA' rating level for bank credit card pools, we generally assume yield is compressed at 10%-13% when a trust enters rapid amortization.

Payment rate

We raised our base-case total payment rate assumption to 19.00% from 16.50%. CCCIT's average payment rates have been increasing since 2009, averaging about 28.1% over the past two years, and have generally been in line with the U.S. Bankcard CCQI's payment rates (see chart 6a). For the past three years, the trust's payment rates reached or approached historical highs, partly due to convenience users.

As of September 2020, about 5.6% of the obligors in the trust have made minimum payments, while 25.5% have made full payments. Approximately 22.9% of the credit card receivables in the master trust as of September 2020 were related to the Citibank/American Airlines AAdvantage co-branded program. These cardholders receive frequent flyer miles. Although travel purchases have declined substantially due to COVID-19 pandemic, the AAdvantage cards continue to perform well, with a nine-month average payment rate of 46.1% as of September 2020, compared with 49.5% in 2019.

Consistent with our criteria, our stress scenarios assume that the number of convenience users in the pool will decrease before the amortization period's first month and the portion of revolvers will increase, causing payment rates to fall significantly. Therefore, our stress assumption of 9.50% at the 'AAA' rating level is 50.00% of our base-case assumption of 19.00%, which is well-below actual payment rates. The increase in our stress assumptions reflect the increase in our base-case payment rate.

Discover Card Execution Note Trust

Contacts: Romil Chouhan and Stefan Bratic

Discover Bank began its securitization program in 1990 with Discover Card Trust 1990 A. Discover Bank formed an additional 14 stand-alone Discover Card Trusts before establishing Discover Card Master Trust I in October 1993. Discover Card Execution Note Trust (DCENT) was established July 2007 when Discover Bank transferred an undivided interest in the assets of the master trust, represented by a collateral certificate, to DCENT to support the issuance of notes. On Jan. 1, 2016, Discover Bank assigned its rights and obligations as depositor and seller under its pooling and servicing agreement and as beneficiary under its trust agreement for the note issuance trust to Discover Funding LLC.

Structural features

DCENT is structured to issue delinked tranches of notes from a single series (the DiscoverSeries) if certain issuance conditions are met, including sufficient subordination to provide the required credit support. The note issuance trust's collateral is an undivided investor interest in Discover Card Master Trust I's series 2007-CC collateral certificate, which is collateralized by receivables generated by revolving credit card accounts that Discover originates and services. There are four classes of DiscoverSeries notes: classes A, B, C, and D. The class A notes benefit from the subordination of the class B, C, and D notes, which together provide 21.0% credit support to the class A notes.

Collateral overview

We believe the receivables generated from accounts designated to the master trust reflect a geographically diversified portfolio of well-seasoned prime accounts. Despite the gradual increase in credit lines the company has granted to accounts over time, the trust balances have remained relatively stable. We attribute the increase in credit limits to the high concentration of highly seasoned accounts, which have longer payment histories and display more generally predictable behavior than newly originated accounts. As of September 2020, accounts aged more than 60 months generated 98.8% of the total receivables. Receivables with FICO scores greater than 720 accounted for 62.7% of the total trust, while receivables with FICO scores below 660 represented 10.6%. Assuming the pool's collateral composition does not change, we believe the receivables will continue to perform well in 2021.

Loss rate

Our base-case loss assumption for this trust is 5.00%. This base-case is well-above the current loss rate because we believe the revolving pools could change over time and performance could weaken if unseasoned accounts with lower credit quality were included in the trust. Net losses for DCENT are consistently lower than the industry average calculated in the U.S. Bankcard CCQI, and in the years prior to the COVID-19 pandemic, more than 1.5% lower than the unemployment rate (see chart 5a). The 31.0% 'AAA' stressed annualized peak loss assumption we use in our cash flow model for the pool is lower than the 33.0% floor we established for a benchmark pool in an extreme recession scenario for a 'AAA' rating because we believe the pool's losses outperformed the U.S. Bankcard CCQI during the Great Recession.

In particular, the pool's loss rates have both remained lower than and improved earlier than the U.S. Bankcard CCQI. The loss rate for the master trust's pool also dipped below the unemployment rate earlier than indicated by aggregate bankcard data. Net losses on the principal receivables in Discover Card Master Trust I doubled to a peak of 9.2% in August 2009 from a low of 4.6% in December 2007. By September 2010, loss rates declined below 8.0% and continued to fall steadily thereafter. Comparatively, U.S. Bankcard CCQI losses increased by 117.0% to 10.5% in August 2009 from 4.9% in December 2007 and remained in the 9.0%-10.0% range until September 2010.

Yield

Our base-case yield assumption is 16.00%. The pool's yield decreased in 2012 due to the diminishing effect of the discounting feature (where principal collections are used as yield) after the series 2009-SD certificates matured in January 2012. Despite this, yield continues to benefit from the addition of interchange fees in 2006 to finance charge receivables (see chart 4a).

For DCENT, our stress assumption of 11.00% at the 'AAA' rating level is 68.75% of our base-case assumption of 16.00%. Yield for the trust is relatively low due to the high credit quality of the obligors. The smaller haircut for DCENT (relative to the sample haircut ranges listed in our criteria) reflect our assumption that high credit quality, seasoned cardholders are likely to experience smaller increases in delinquencies than non-prime accounts in a downturn. This resulted in less volatility in stressed yield compared with pools that include a high portion of non-prime accounts. We also consider the effect legislation or regulatory actions could have on interest rates and fees, as well as competitive pressures, which could all also result in yield in yield in the 10.0%-13.0% range.

Payment rate

Our base-case total payment rate assumption for the pool is 18.00%. We view the pool's payment rate performance as strong and consistent, partly driven by Discover's popular cash back rewards program. Cash back rewards programs typically attract convenience users. As of September 2020, about 24.4% of obligors in the pool made full payments, while 6.2% made minimum payments (see chart 6a). In our stress scenarios, we assume the number of convenience users in the pool declines before an amortization scenario and the portion of revolvers increases, significantly decreasing payment rates. To reflect this, our base-case and stress assumptions are well below the actual payment rates.

1st Financial Credit Card Master Note Trust III

Contact: Romil Chouhan and Stefan Bratic

1st Financial Credit Card Master Note Trust III (1st FCCMNT III) is a statutory trust organized under the laws of Delaware to accept receivables from the transferor, 1st Financial Bank USA (1st Financial). The trust has granted a security interest in the receivables to secure indebtedness of the trust associated with the issuance of notes. 1st Financial is a privately held federally insured state bank chartered under the laws of South Dakota. It is insured through the Federal Deposit Insurance Corp. (FDIC) and regulated by the Division of Banking of the State of South Dakota and the FDIC. 1st Financial is the originator, transferor, and servicer of the portfolio of receivables' revolving credit card accounts.

Structural features

1st FCCMNT III is structured as a master note trust that issues notes through separate series. The sole series outstanding has a senior/subordinated structure consisting of four classes (A, B, C, and D) of senior/subordinated notes and three cash collateral accounts (CCAs), which provide credit support to the notes. The CCA accounts are funded through loans backed by the CCA notes (see table 2). The notes and CCAs benefit from a spread account, and the senior and intermediate CCAs are backed by the amounts on deposit in the more subordinated CCAs as part of the credit enhancement structure.

Table 2

Collateral overview

1st FCCMNT III assets include credit card receivables for designated Mastercard and VISA revolving credit card accounts that meet the eligibility criteria for inclusion in the master trust. The obligors, at origination, are students who are enrolled in, or about to enroll in, two- and four-year U.S. colleges and universities. The obligors in this market segment generally have limited or no previous credit history. To manage this risk, 1st Financial typically assigns a very low credit limit at account origination and only increases an account's credit limit after ongoing testing and measurement of its performance.

1st Financial focuses on educating its student customers on credit management when they first apply for a credit card account, and the bank continues to provide advice on early-stage delinquency rehabilitation as it identifies the causes of these delinquencies. The trust transaction documents include eligibility criteria for designated accounts that aim to mitigate credit risk. For instance, an account with less than six months' seasoning may be deemed eligible only if the obligor has made at least one payment and the balance of all receivables that have existed for less than six months does not exceed 10% of the trust's total receivables balance. In addition, eligible accounts may not have any receivables that are shown as past due on the most recent billing statement.

Loss rate

Our base-case loss assumption for 1st FCCMNT III of 7.50% is above the trust's actual net loss rate. Net loss rates for 1st FCCMNT III leading up to and during the 2007-2009 recession were lower than the U.S. Bankcard CCQI. We believe this was partially attributable to the U.S. population with college degrees experiencing lower unemployment rates than the overall population. However, loss rates at 1st FCCMNT III have been higher than the U.S. Bankcard CCQI since the Great Recession (see chart 5a). We believe student cardholders with little or no credit history represent riskier obligors, which could contribute to the bank's relatively higher delinquencies and losses compared with its U.S. Bankcard CCQI peers.

Consequently, our 36.0% 'AAA' stressed annualized peak loss assumption is greater than the 33% floor we established for a U.S. benchmark pool during an extreme recession and reflects the characteristics of the collateral pool, which we view as more volatile than other trusts. However, we believe the highly seasoned accounts (100% of receivables greater than 60 months), credit limits (16.3% with limits of $10,000 and less), and the history of college-educated obligors experiencing lower unemployment rates and higher wages than the overall population, collectively, should help maintain and stabilize loss rates and delinquencies.

Yield

Our base-case yield assumption is 20.00%. 1st FCCMNT III's yield (before and after the Great Recession) has been higher than the U.S. Bankcard CCQI (see chart 4a). This is to be expected, given the riskier targeted consumer segment and associated higher annual percentage rates (APRs) and fees. Our 'AAA' stressed yield of 12.00%, which is 60.00% of the base case, reflects the higher risk obligors who are likely to experience a greater increase in delinquencies under stress. In addition, pools that include lower-quality obligors may be more affected by legislative and regulatory actions because fees and interest rates are typically higher than those for prime customers. In a stress scenario, we expect a decline in the number of convenience users and an increase in revolving account users. For 1st FCCMNT III, given that the obligors are predominately revolvers, we expect a marginal impact on yield under such stress.

Payment rate

Our base-case total payment rate assumption is 8.25%. 1st FCCMT III's payment rate is the lowest among the U.S. bankcard trusts and the U.S. Bankcard CCQI (see chart 6a). In our 'AAA' scenario, we assume payment rates immediately decrease to a stressed level of 4.54%. Our assumption reflects the characteristics of the collateral receivables, a significant proportion of which are revolvers making minimum payments, as opposed to bankcards, which have a combination of revolvers and convenience users. As such, we expect 1st FCCMT III's payment rate to remain the lowest of the U.S. Bankcard CCQI pool.

Canadian Bankcard

Evergreen Credit Card Trust

Contacts: Piper Davis and Mayan Abraham

Evergreen Credit Card Trust is a linked master trust that issues notes through discrete series. Each series is backed by an undivided interest in a revolving pool of VISA and Mastercard credit card receivables generated by designated personal and business accounts originated and serviced by The Toronto-Dominion Bank (TD).

Structural features

The outstanding series have senior/subordinated structures each consisting of three rated classes of notes: A, B, and C. The subordination for classes A, B, and C are 6.5%, 2.5%, and 0%, respectively. The three classes also benefit from excess spread, while class C benefits from an additional class C reserve account. The amount required to be deposited in the class C reserve account at closing is zero, and it will increase incrementally if the series' three-month average excess spread (yield less defaults and transaction expenses, including note interest and a 2% successor servicing fee) is less than 4.0% or if an early amortization event or event of default occurs. The required cash reserve amount will be funded through excess spread, if available, up to the amount determined in the transaction documents for each series. No interest payment will be made to class B until the required payment of interest is made of class A. Similarly, no interest payment will be made to class C until the required payment of interest is made of class B. Principal payments on the class C notes generally will not begin until the class A and B notes both have been paid in full.

Collateral overview

In rating the inaugural issue in 2016, we relied on historical managed pool data to develop our base-case and stress assumptions. For this review, we also analyzed actual trust collateral and performance data to determine our assumptions. Based on the trust collateral, we believe this pool exhibits a similar composition to that of other bankcard pools included in the Canadian CCQI. As of October 2020, approximately 86.8% of receivables were generated under accounts from prime borrowers with credit scores above 660, while 37.2% were from borrowers with credit score of at least 760. The pool is relatively well diversified geographically, but it has a higher provincial concentration in Ontario than the proportionate share of the population. The accounts have strong seasoning, with all receivables generated from accounts open five years or more.

Loss rate

Our base-case loss rate is 5.0%. Net losses for the trust averaged 2.6% for the 12 months ended November 2020, an increase from 2019 average loss rate of 2.3% (see chart 5c). Our 'AAA' stressed annualized peak loss assumption of 25.00% for this trust is within the 21%-30% range we apply for typical Canadian credit card pools but well below the 33% floor we established for the U.S. benchmark pool in our criteria. Our assumption reflects our view that Evergreen's net losses are historically lower than its peers' and have trended below the Canadian CCQI's loss rate.

Our 5.0% base-case loss assumption remains meaningfully above trust' actual loss rates, reflecting our forward-looking view that loss rates could spike quickly in this pool. The trust's high payment rate means the portfolio composition can change much more quickly than for trusts with lower payment rates. This could occur if high-quality obligors quickly pay off their balances and leave the pool, thus leading to a rapid shift in the pool composition, which could affect pool performance and credit quality.

Yield

Our base-case yield assumption for Evergreen is 15.0%. Yield for the trust is relatively low and reflects the obligors' high credit quality. The 12-month average yield for the trust accounts was 22.0% as of November 2020, which is slightly lower than the Canadian CCQI's 12-month average of 23.4% (see chart 4c). Our base-case assumption also reflects our view that interchange may not be available to the trust due to set-off risk if the card lender becomes insolvent and an expected reduction in new purchase volumes follows. Therefore, we generally do not assign any credit to interchange fees in the yield for the higher rating categories. The smaller 'AAA,' 'A,' and 'BBB' haircuts for Evergreen (relative to the sample haircut ranges listed in our criteria) reflect our assumption that high-credit-quality, seasoned cardholders are likely to experience smaller increases in delinquencies than non-prime accounts in a downturn. This resulted in less volatility in stressed yield than in pools that include a high portion of nonprime accounts.

Payment rate

Our base-case total payment rate assumption for the pool is 28.5%. The total payment rate has been gradually decreasing for the trust accounts since 2018, though it remains above the Canadian CCQI. As of November 2020, the 12-month average payment rate for the trust accounts was 47.5%, which is higher than the Canadian CCQI's 12-month average of 46.1% (see chart 6c). In our stress scenarios, we assume the number of convenience users in the pool declines before the first month of an amortization scenario and the portion of revolvers increases. Therefore, our base-case assumption is well below the actual payment rates.

Purchase rate

Our purchase rate range for our 'AAA' to 'A' rating categories is 3.50%-5.50%, reflecting the purchase rate credit assigned to the originator, TD Bank. We could review our purchase rate assumption if we lower our issuer credit rating on TD Bank.

Glacier Credit Card Trust

Contacts: Romil Chouhan and Stefan Bratic

Glacier Credit Card Trust (Glacier; formerly Canadian Tire Receivables Trust) was established in March 1995. Glacier issues credit card asset-backed notes in series, each secured by undivided co-ownership interests in a revolving pool of credit card receivables owed by selected accounts acquired from Canadian Tire Bank (CTB). CTB is an indirect 80%-owned subsidiary of Canadian Tire Corp. Ltd., the remaining 20% of which is owned by The Bank of Nova Scotia (Scotiabank). CTB is a Schedule I Canadian chartered bank governed by the Bank Act (Canada) and is a member of Canada Deposit Insurance Corp. (CDIC). Eligible deposit products issued by CTB qualify for CDIC insurance coverage.

Structural features

Glacier is structured as a master note trust that issues notes through separate series. Each series of notes (except series 1997-1, which is not rated by S&P Global Ratings) has a senior/subordinated structure consisting of the rated senior and subordinated notes and overcollateralization (the enhancement amount) that provide credit support to both notes.

Collateral overview

Most of the receivables are from Mastercard accounts denominated in Canadian dollars. As of September 2020, the master trust comprised C$4.2 billion of receivables, with an average account balance of C$1,106 or C$2,906 when excluding accounts with a credit or zero balance. 43.6% of the receivables were from accounts with a balance greater than C$10,000, with an estimated utilization rate of approximately 15.0%. 75.2% of the receivables were from accounts seasoned at least five years (60 months). The geographic distribution of the receivables has been stable over time, with the largest exposures coming from the two most populous provinces: Ontario (46.7%) and Quebec (20.0%). The receivables portfolio's exposure (approximately 14.1% of pool balance) to the oil and commodity-dependent provinces of Alberta (9.6%), Newfoundland and Labrador (1.9%), and Saskatchewan (2.6%) are within historical norms.

We believe certain key macroeconomic factors, including high current household debt levels and higher future unemployment levels, could contribute to deterioration in credit card collateral performance. Nevertheless, our existing base-case assumptions for Canadian credit card ABS trusts incorporate these expectations. Assuming Glacier's collateral composition remains stable, coupled with active risk management of the accounts, we believe the receivables will continue to perform well in 2021.

Loss rate

Our base-case loss assumption of 8.50% for Glacier is above the trust's actual net loss rate. Net losses for Glacier are the highest of the Canadian credit cards trusts, but they reflect the long-standing business model of account origination at Canadian Tire stores with small credit limits and active management of obligors' ability and willingness to pay. Although Glacier has one of the highest charge-off rates among Canadian credit card ABS issuers, the trust's charge-off rate was one of the least volatile during the 2008-2009 recession (see chart 5c). Overall, Glacier's gross loss rate is improving and its recovery rate is consistent with prime bankcard trusts. Our 29.75% 'AAA' stressed annualized peak loss assumption is below the 33.0% floor we established for a U.S. benchmark pool during an extreme recession and reflects the characteristics of the collateral pool and the low volatility of the charge-off rate during the 2008-2009 recession.

Yield

Our base-case yield assumption for Glacier is 17.00%, which is higher than the 15.00% for the Golden, Evergreen, and Trillium credit card trusts. However, this assumption is consistent with historical norms and reflects the characteristics of the collateral pool, including a lower proportion of convenience users and a higher proportion of APR in yield. Glacier's yield, which consists predominately of credit charges (approximately 83% of total yield) and interchange (approximately 17% of total yield), is below other Canadian credit card ABS issuers and the Canadian CCQI (see chart 4c). However, because we believe interchange may not be available to the trust if the card lender becomes insolvent, we generally do not assign any credit to interchange in our yield assumptions for the higher rating categories. As a result, our base-case yield assumption is significantly below the current yield.

In our 'AAA' and 'A' analysis, we assume an immediate decline in the stressed portfolio yield, based on our assumption that restrictive pricing regulations and competitive pressures, including low introductory and promotional rates, would suppress yield during amortization. Consistent with our assumptions for other Canadian issuers, our 'AAA' stressed yield is equal to 65% of the base case, and our 'A' stressed yield is equal to 71% of the base case. We believe both represent a smaller haircut to the base case than for other Canadian issuers because the characteristics of the collateral, including a large portion of highly seasoned accounts with more than five years of seasoning, result in a less volatile stressed yield than pools that include a higher portion of newly originated accounts.

Payment rate

Our base-case payment rate assumption for Glacier is 19.00%. Glacier has the lowest average payment rate of any of the active Canadian credit card trusts (see chart 6c). The difference in payment rates between Glacier and its Canadian peers can be attributed to the lower proportion of convenience users in the receivables portfolio, compared with the estimated 50% in the large bankcard pools. The receivables are co-branded with Canadian Tire, which attract obligors who charge the cards for rewards incentives.

In our stress scenarios, we assume that the number of convenience users in the pool declines before the first month of an amortization scenario and the portion of revolvers increases, resulting in a sharp decline in payment rates. The difference between the actual payment rate and base-case payment rate for this trust is not as significant as some other Canadian issuers because of the lower number of convenience users in the portfolio. In our 'AAA' and 'A' analysis, we assume that payment rates immediately decrease to stressed levels of 9.50% and 11.40%, respectively.

Golden Credit Card Trust

Contacts: Piper Davis and Hon Ho

Golden Credit Card Trust is a master trust that issues notes through discrete series. The collateral for each series consists of an undivided co-ownership interest in a revolving pool of Canadian dollar-denominated Mastercard and VISA credit card receivables generated by personal and small business accounts originated by Royal Bank of Canada (RBC).

Structural features

Golden is structured as a master note trust that issues notes through separate series. The notes are currently issued under a senior/subordinated structure consisting of class A, B, and C notes. Class A notes will benefit from 6.50% credit enhancement provided by the subordinated class B and C notes and from deposits made to the reserve account. The required reserve account amount will be zero at closing and will increase incrementally if the series' three-month average excess spread (yield over transaction expenses and defaults) is less than 4.00%.

Collateral overview

The collateral pool composition remains stable and exhibit similar characteristics to other bankcard collateral included in the Canadian CCQI. The accounts are very seasoned, with 100.0% of the receivables from accounts at least 60 months old as of September 2020. Prime accounts, as measured by FICO scores greater than 700, represented 72.5% of total receivables. The pool is geographically diversified, with 36.8% provincial concentration in Ontario--the most populated province. Overall, collateral performance remains stable, the receivables in the pool exhibit a higher payment rate and a lower loss rate than the Canadian CCQI, and the yield is broadly in line with the index.

Loss rate

Our base-case loss rate assumption is 4.0%. Our 'AAA' stressed annualized peak loss assumption of 21.38% is at the lower end of the 21%-30% range we apply for typical Canadian credit card pools but below the 33.0% floor we established for a U.S. benchmark pool under an extreme level of economic stress. Our assumption reflects our view that the trust's net losses are lower than its peers' and have trended below the Canadian CCQI.

The trust's three-month average net loss rate peaked at 4.2% in March 2010 before declining to 2.5% as of March 2018; it has since remained in the 1.4%-2.5% range, averaging 2.2% over the past two years. In comparison, the Canadian CCQI peaked at 6.1% in July 2009 and declined to 3.0% as of March 2018. While we recognize that increasing unemployment levels in Canada, particularly in commodity producing regions, could result in a moderate rise in delinquencies and charge-offs of Canadian credit card receivables, we believe the pool's geographic diversification and prime seasoned accounts will likely mitigate the overall impact on the trust's performance.

Yield

Our base-case yield assumption for the pool is 15.0%. Before October 2009, the trust's total yield ranged from 12.0% to 15.0%. In October 2009, the trust's documents were amended to include interchange fees generated by the designated accounts in the finance charge collections. Since then, total yield has increased to nearly 23.4% over the past two years, from an average of slightly over 15.0% in 2009 (see chart 4c). However, because we believe interchange may not be available to the trust if the card lender becomes insolvent, we generally do not assign any credit to interchange in our yield assumptions for the higher rating categories. As a result, our base-case yield assumption is significantly below the current yield.

Our 'AAA' stressed yield of 10.00% is equal to 66.67% of the base case. This is a smaller haircut to the base case relative to those of the trust's U.S. peers, but it is in line with other Canadian trusts because this pool has a larger portion of high-quality prime cardholders. We believe Golden is less likely to experience a sharp increase in delinquencies because of the high portion of prime accounts. This resulted in less volatility in stressed yield than pools that include a higher portion of nonprime accounts.

Payment rate

Our base-case payment rate assumption for the pool is 30.0%. Payment rates have been steadily increased to approximately 51.6% over the past two years from more than 40.0% in 2011 (see chart 6c). In our stress scenarios, we assume the number of convenience users in the pool declines before the first month of an amortization scenario and the portion of revolvers increases. Therefore, our base-case assumption is well below the actual payment rate. When modeling our rating scenarios, we assume that payment rates immediately decrease to the stressed level.

Purchase rate

Our purchase rate for our 'AAA' rating category is 3.50%, which reflects the purchase rate credit assigned to the originator, RBC (AA-/Stable/A-1+). We could review our purchase rate assumption if we lower our issuer credit rating on RBC.

Trillium Credit Card Trust II

Contacts: Romil Chouhan and Stefan Bratic

Trillium Credit Card Trust II was established on Feb. 26, 2016, according to the laws of the Province of Ontario. The trust is structured as a linked master trust that issues notes through separate series. Each series is backed by an undivided co-ownership interest in a revolving pool of VISA, Mastercard, or AMEX credit card receivables generated by designated personal and business accounts originated and serviced by The Bank of Nova Scotia (BNS).

Structural features

The outstanding series have a senior/subordinated structure consisting of class A, B and C notes. The class A notes receive credit support from the subordination of the class B and C notes, which equals 8.0% of the total capital structure, excess spread, and any amounts on deposit in the cash reserve account. The amount required to be deposited in the cash reserve account at closing for each series was zero and will increase incrementally if the series' three-month average excess spread (yield less defaults and transaction expenses, including note interest and a contingent successor servicing fee of 2.0%) is less than 4.0%.

Collateral overview

As a newer trust, Trillium exhibited a relatively higher growth rate post-inception than other pools in the Canadian and U.S. Bankcard CCQIs. Average eligible receivables for the trust increased more than 70% to approximately C$5 billion by December 2019 from approximately C$2.9 billion as of December 2011. Comparatively, the Canadian and U.S. Bankcard CCQIs increased 31% and decreased 40%, respectively, over the same period. However, like its peer's, the trust's receivables balances decreased in 2020 to approximately C$4.0 billion.

We believe this pool exhibits a slightly weaker composition than other bankcard pools included in the Canadian CCQI. The pool includes accounts with lower seasoning and a higher percentage of obligors in the lower end of the credit spectrum compared with its peers. As of September 2020, 40.8% of the receivables were seasoned less than five years versus approximately 25% or less for other Canadian issuers. In addition, approximately 15.8% of the receivables have FICO-equivalent scores below 660, versus approximately 13%-14% in the trust's peer pools.

Loss rate

Our base-case loss rate assumption is 7.0%. Our 'AAA' stressed annualized peak loss assumption of 28.00% is at the higher end of the 21%-30% range we apply for typical Canadian credit card pools but below the 33.0% floor we established for a U.S. benchmark pool under an extreme level of economic stress. Our assumption reflects our view that net losses for the trust are higher than its peers' and have historically trended above the Canadian CCQI, though we recognize that in recent years this margin, both against peers and the Canadian CCQI, has narrowed materially. Further, our assumptions consider the trust's shorter performance history, higher growth of receivables, and higher portion of unseasoned accounts and accounts with lower credit scores relative to those of its peers and the industry. They also reflect our forward-looking view, which incorporates certain macroeconomic variables.

Yield

Our base-case yield assumption for the pool is 15.00%. Yield for this pool is comparable with peers. Average yield for the past two years has been slightly over 25.0%, which is a little higher than the Canadian CCQI (see chart 4c). Our base-case assumption reflects our view that interchange may not be available to the trust due to set-off risk if the card lender becomes insolvent and the expected reduction in new purchase volumes following such an insolvency. For these reasons we will generally not assign any credit to interchange fees in yield for the higher rating categories.

Our 'AAA' stressed yield is 10.00%, which is 66.67% of the base case. Similar to other pools that include high-quality prime cardholders (68.3% of the receivables had FICO scores of 700 or greater as of September 2020), we believe this pool is less likely to experience a sharp increase in delinquencies, resulting in less volatility in stressed yield compared with pools that include a higher portion of nonprime accounts. For these reasons, the haircut applied to this trust's yield is lower, relative to the general range of stresses we publish in our criteria. We also consider the effect legislation or regulatory actions could have on interest rates, fees, and competitive pressures, which could also result in yield in the 10.0%-13.0% range.

Payment rate

We revised our base-case total payment rate assumption for the pool to 27.50% from 25.00%. Our assumption reflects the steady upward drift in payment rate at Trillium since the trust's inception. This has risen from a 2017 average of 43.6% to an 11-month average of 48.4% as of November 2020, which is now in line with Trillium's bankcard peers. Although the actual payment rate is higher than our base-case (see chart 6c), this difference can be partially attributed to convenience users. In our stress scenarios, we assume the number of convenience users in the pool declines before the first month of an amortization scenario and the portion of revolvers increases, resulting in a sharp decline in payment rates. Consequently, our base-case assumption is well below actual payment rates.

U.S. Private-Label Cards

Citi Omni Master Trust

Contact: Piper Davis and Mayan Abraham

Citibank Omni Master Trust (Citibank Omni) is the issuer of Omniseries class A, B, C, D, and E notes. Omni's collateral is an undivided investor interest in Citibank Omni Trust's series 2003 collateral certificate, which is collateralized by credit card receivables from VISA, Mastercard, American Express, and private-label revolving credit card accounts that are originated and serviced by Citibank N.A. Citibank Omni is a delinked trust in which delinked tranches can be issued if certain issuance conditions are met, including sufficient subordination to provide the required credit support.

Structural features

Omniseries is a senior/subordinated structure and consists of class A, B, C, D, and E notes. The credit enhancement for class A is from subordination of classes B, C, D, and E; class B from classes C, D, and E; class C from classes D and E; and class D from class E.

The credit enhancement currently required for the class A notes is 30.0% of the series' total capital structure. We currently only rate the class A notes.

Collateral overview

While the trust collateral performance is not publicly available, it is well seasoned and is performing in-line with its peers and the Private-Label CCQI.

Our base-case and stress assumptions remain unchanged for this trust (see table 4).

Synchrony Credit Card Master Note Trust

Contacts: Piper Davis and Mayan Abraham

Synchrony Credit Card Master Note Trust (Synchrony CCMNT) is a master trust that issues notes through discrete series. The notes are secured by a pool of private-label and co-branded revolving credit card receivables generated from accounts owned by Synchrony Bank.

Structural features

Synchrony CCMNT has a senior/subordinated structure consisting of class A, B, C, and D notes. The credit enhancement for class A is from subordination of classes B, C, and D; class B from classes C and D; and class C from class D. The classes all benefit from a specified amount of unrated excess collateral. Where class D is part of a series, the amount of excess collateral decreases in lieu of class D. The trust established a reserve account to cover interest shortfalls during the accumulation period for any series. Additionally, if certain excess spread thresholds are breached, the spread account, which is maintained for the benefit of the class D notes, becomes funded. If a class D is not part of the series, no spread account is maintained for that series.

Collateral overview

The trust collateral pool comprises of credit card receivables from revolving credit card accounts under certain Synchrony Bank private-label and co-branded credit card program agreements with various retailers. As of October 2020, private label and co-branded receivables were 73% and 27%, respectively, of the collateral pool. The top five retail partners (Sam's Club, Lowe's, JCPenney, Gap, and Amazon) accounted for approximately 90.4% of the receivables. In 2019, Walmart receivables were removed from the trust, and Amazon receivables have been added and account for about 12.9% of total trust receivables. We believe the receivables are well-seasoned, geographically diverse, and perform broadly in line within our expectations.

Loss rate

Since our January 2019 shelf review, Synchrony CCMNT's loss performance has remained stable and in-line with the Private-Label CCQI, averaging 4.09% and 4.28%, respectively, for the 11 months ended November 2020. Our base-case loss of 8.50% and our stress scenarios remain unchanged. Our base-case loss assumption reflects scenarios where we removed better-performing retail partners from the trust to account for potential shifts in the collateral or termination of retail partner agreements, as well as stressed performance for bankrupt partners. As a result, our base-case assumption is meaningfully above the recent trust loss rates. Our 36.00% 'AAA' stress also remains higher than the 33% peak loss for an archetypical pool, reflecting the retail-oriented collateral composition.

Yield

Our base-case yield assumption is unchanged at 21.50%. Synchrony CCMNT's yield averaged 25.2% as for the 11 months ended November 2020 and has increased slightly since our last shelf review in January 2019. This reflects the general increase in yield across retail trusts in our Private-Label CCQI. Synchrony CCMNT's 12.00% 'AAA' stressed yield (55.81% of the base-case) is in-line with its peers', since we view the risk to the private label trusts to be similar at the higher rating level.

Payment rate

We did not revise our base-case payment rate of 13.00%. Synchrony CCMNT has typically exhibited a significantly lower payment rate than the Private-Label CCQI, though it remained very stable--even during the 2008 recession. From 2007 to 2019, the annual average payment rate was 14.2%-16.8%, compared to 13.7%-19.3% for the Private-Label CCQI. Our base-case also reflects our retail partner simulations and remains well below the actual payment rate. Similar to other private-label retail trusts, we apply slightly higher haircuts to our base-case payment rate in our stress scenarios. Our 'AAA' stress payment rate is 6.25%.

Purchase rate

Our purchase rate range for our 'AAA' to 'BBB' rating categories is 1.00%-4.50%, which reflects the purchase rate credit assigned to the originator, Synchrony Bank. In addition to the originator's credit rating and ability to generate new receivables, in assigning purchase rate credit, we also consider the utility of private-label and co-branded cards, the collateral pool composition, and the retail partners' financial strength.

Synchrony Card Issuance Trust

Contacts: Piper Davis and Mayan Abraham

Synchrony Card Issuance Trust (SYNIT) is a master trust and the issuing entity for SynchronySeries. The SynchronySeries issuances are secured by a pool of private-label receivables generated from accounts owned by Synchrony Bank. The trust is structured as a delinked master trust that may issue new SynchronySeries notes, classes or tranches if the issuance conditions stipulated in the program's documents are satisfied, including requirements that a minimum collateral amount is maintained. The trust issued its first SynchronySeries notes in September 2018.

Structural features

The SynchronySeries is a multi-tranche series that is issued in up to A, B, C, and D classes under a senior/subordinated structure. Each class of SynchronySeries notes may consist of one or more tranches. The credit enhancement for class A is from subordination of classes B, C, and D; class B from classes C and D; and class C from class D. The classes all benefit from a specified subordinated transferor amount. The subordinated transferor amount ensures that the required collateral amount necessary to support the notes is achieved if one or more of the subordinated classes (B, C, or D) is not issued. In addition to hard credit enhancement, the notes will also benefit from excess spread, a reserve account to cover interest shortfalls during the accumulation period, and a class D reserve that must be funded if excess spread falls below certain thresholds.

Collateral overview

The trust collateral pool consists of designated private-label and co-branded credit card receivables originated by Synchrony Bank through its credit card program agreements with various partners. As of October 2020, the trust's top five partners (Sam's Club, Lowe's, TJ Maxx, Old Navy/Gap/Banana Republic, and PayPal) accounted for approximately 90.2% of the receivables. Private-label and co-branded cards account for 22.0% and 78.0% of the trust's receivables, respectively. Overall, we believe the receivables designated to the trust have characteristics similar to other trusts in the Private-Label CCQI.

Loss rate

We established a base-case loss assumption of 8.25%, which incorporates our view of Synchrony's managed portfolio, trust performance, and our various simulations. Our base-case loss is meaningfully above the trust portfolio's and the selected portfolio's loss rates. Our base-case loss assumption reflects scenarios where we removed better-performing retail partners from the trust to account for potential shifts in the collateral or termination of retail partner agreements, as well as stressed performance for bankrupt partners. As a result, our base-case assumption is meaningfully above the trust's recent loss rates. Our 36.0% (4.4x the base case) 'AAA' stressed annualized peak loss assumption for this trust is within the 3.0x-6.6x range we established for the U.S. benchmark pool in our criteria. At the 'AA', 'A', and 'BBB' levels, our stress loss assumptions are 3.8x, 3.0x, and 2.1x of our base-case assumption, respectively.

Yield

Our base-case yield is 21.00%, which is meaningfully below trust portfolio and selected portfolio yields. SYNIT's 12.00% 'AAA' stressed yield (57.14% of the base-case) is in-line with its peers', since we view the risk to the private-label trusts to be similar at the higher rating level. At the 'AA', 'A', and 'BBB' levels, our stress assumptions are 59.52%, 61.90%, and 76.81% of our base-case assumption, respectively.

Payment rate

Our forward-looking base-case total payment rate assumption for the trust is 15.75%. Our base-case assumption reflects scenarios where we removed better-performing retail partners from the trust to account for potential shifts in the collateral or termination of retail partner agreements, as well as stressed performance for bankrupt partners.

Altogether, our base-case assumption is well below the trust's and the selected portfolio's actual payment rates, but the haircut is less compared to other retail trust in the Private-Label CCQI. Our 7.75% (49.21% of the base-case) 'AAA' stressed payment rate assumption for this trust is within the 45%-55% range we established for investment-grade originators in our criteria. At the 'AA', 'A', and 'BBB' levels, our stress payment rate assumptions are 55.56%, 61.90%, and 73.02% of our base-case assumption, respectively.

Purchase rate

We assume 1.00%, 1.25%, 2.00%, and 4.50% purchase rates for our 'AAA', 'AA', 'A', and 'BBB' rating categories, respectively. The purchase rate assumptions reflect our view of the originator's (Synchrony Bank's) ability to continue generating and transferring receivables to the trust. We also consider the cards' utility as it relates to dual-purpose cards and retail cards, and our assumptions incorporate the strengths, ratings, diversification, and potential shift in composition of these partners in the pool.

We could review our purchase rate assumption if we lower our issuer credit rating on Synchrony Bank.

World Financial Network Credit Card Master Note Trust

Contacts: Romil Chouhan and Stefan Bratic

World Financial Network Credit Card Master Note Trust (WFNMNT) was established in 1996 by Comenity Bank. Alliance Data Systems Corp. (ADS) holds a 100% stake in Comenity LLC, which holds a 100% stake in Comenity Bank. Each series of notes is issued by WFNMNT and represents debt of the issuing entity. The WFNMNT's primary assets are a collateral certificate issued by World Financial Network Credit Card Master Trust (the collateral trust). The collateral certificate represents a beneficial interest in the assets of the collateral trust, which owns primarily credit card receivables arising from private-label revolving credit card accounts.

Structural features

WFNMNT utilizes a master note trust that issues notes through separate series. These series utilize a senior/subordinated structure consisting of classes of notes (the senior and subordinated notes) and overcollateralization (the excess collateral amount) that provide credit support to the series.

Collateral overview

The portfolio backing the ownership interest includes a diversified pool of principal receivables from about 70 retailers owned by the master trust. As of November 2020, approximately 50.7% of the principal receivables were generated by soft goods retailers (e.g., clothing and similar merchandise), 21.7% by furniture retailers, 11.7% by jewelry retailers, 9.6% by co-branded cards, 5.5% by department stores, and 0.8% by other retailers. The portfolio does not include all of Comenity Bank's private-label or co-branded credit card programs. The four largest concentrations of receivables from any merchant (including affiliates of that merchant) are L Brands Inc. (20.6% of the principal receivables), Signet Retail Group (11.2%), and Wayfair (7.6%). No other merchant accounted for more than 5.0% of the principal receivables as of November 2020.

In July 2020, co-branded Visa accounts related to Sony and Sony Playstation, totaling approximately $300 million were designated to the trust, representing the first instance of conveyance of co-branded credit card receivables to the trust.

Loss rate

The trust experienced historically low loss levels and delinquencies from 2012 to 2014 as the general economy improved after the Great Recession. However, since 2015, net losses have been trended upward to an 11-month average of 7.7% as of November 2020 from 5.1% in 2015. The master trust's net loss rate has consistently exceeded the Private-Label CCQI's net loss rate since early 2013 (see chart 5b).

Our base-case loss assumption of 10.50% factors in the loss trend, peer comparisons to other private-label credit card issuers, and simulations we ran on the pool. In our hypothetical scenarios, we removed better-performing merchants from the trust to account for potential shifts in the portfolio or termination of merchant agreements, as well as stressed performance for bankrupt merchants. Our base case is also forward-looking and reflects economic variables, including our U.S. unemployment economic forecast.

Yield

The base-case yield assumption on the pool is 25.25%. The trust's historical yield exceeds the Private-Label CCQI's yield (see chart 4b). Similar to other private-label cardholders, Comenity cardholders are less sensitive to higher APRs than bankcard holders because they view the card as both a relationship and a financing decision. Our 'AAA' and 'AA' cash flow analyses assume an immediate stress to portfolio yield to reflect restrictive pricing regulations and competitive pressures, including low introductory and promotional rates.

Payment rate

The base-case payment rate assumption on the pool is 14.50%. The trust's payment rate has trended below the Private-Label CCQI's payment rate since 2015 (see chart 6b). Comenity caters to customers who want a relationship with the retailer (through customized permission-based emails, discounts, etc.), as opposed to customers who necessarily need credit to purchase from these retailers. The trust's payment rate has fallen below the Private-Label CCQI over recent years as the trust has gradually shifted its merchant concentration away from soft goods accounts (which tend to have lower balances) to retailers that sell jewelry, appliances, and bigger-ticket items. As a result, an identical dollar payment results in a marginally lower payment rate for Comenity. In our analysis, we assume that payment rates immediately decrease to the stressed level when modeling all of our rating scenarios.

Purchase rate

We assume a zero purchase rate in the trust's cash flow runs. S&P Global Ratings currently does not rate Comenity or its parent, Alliance Data Systems Corp. Because Comenity is a private-label issuer that concentrates in soft goods, we believe the cards in the portfolio may not have high use if Comenity can no longer fund receivables (i.e., if it goes insolvent, if it pulls out of the business, or if its merchants go out of business).

Cash Flow Modeling

Based on the performance discussed above, we made the following assumptions for the key performance variables (see tables 3-6).

Table 3

Table 4

Table 5

Table 6

Related Criteria And Research

• Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020
• U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria, May 15, 2019
• Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
• Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
• U.S. Credit Card Securitizations: Methodology And Assumptions, Aug. 24, 2017
• Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
• General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
• Global Derivative Agreement Criteria, June 24, 2013
• Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
• General Methodology And Assumptions For Rating Canadian Credit Card ABS, March 22, 2012
• Principles Of Credit Ratings, Feb. 16, 2011
• Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009

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• U.S. Credit Card Quality Index: Monthly Performance - November 2018, Jan. 4, 2019
• Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of Macroeconomic The Top Five Macroeconomic Factors, Dec. 16, 2016