Fitch Rates Golden Credit Card Trust, Series 2016-5
--USD$700,000,000 class A asset-backed notes 'AAAsf'; Outlook Stable;
--CAD$44,386,363 class B asset-backed notes 'Asf'; Outlook Stable;
--CAD$19,727,273 class C asset-backed notes 'BBB+sf'; Outlook Stable.
KEY RATING DRIVERS
High Collateral Quality: The underlying collateral characteristics play a vital role in the performance of a credit card ABS transaction. Fitch closely examines such collateral characteristics as credit quality, seasoning, geographic concentration, delinquencies and utilization rates.
Strong Collateral Performance Metric: As of July 2016, Golden Credit Card Trust's (GCCT) collateral performance metrics were in line with the Fitch indices. Charge-offs, 60+ day delinquencies and monthly payment rate have remained relatively stable over the past 24 months. Gross yield has been robust over the past two years.
Adequate Credit Enhancement (CE): The class A notes of series 2016-5 will benefit from 6.50% CE derived through the subordination of both class B and class C notes and the cash reserve account.
The class B notes will benefit from 2.00% CE derived through the subordination of class C notes and the cash reserve account.
The class C notes CE is based solely on the cash reserve account.
Quality Servicing Capabilities: Royal Bank of Canada (RBC) is an effective servicer, as evidenced by historical delinquency and loss performance of securitized receivables. Deterioration in the credit quality of RBC may affect the performance of the collateral pool backing the notes.
Fitch models three different scenarios when evaluating the rating sensitivity compared to expected performance for credit card asset-backed securities transactions: 1) increased defaults; 2) a reduction in monthly payment rate (MPR); and 3) a combination stress of higher defaults and lower MPR.
The harshest stress scenario of a combined 75% increase to defaults and a 35% reduction of MPR could lead to a two-notch downgrade for classes A and B. The rest of the stress scenarios are unlikely to impact the ratings.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.