Fitch Affirms Turquoise Credit Card Backed Securities plc
USD750m Class A notes affirmed at 'AAAsf'; Outlook Stable
GBP33m Class B notes affirmed at 'Asf'; Outlook Stable
The notes are collateralised by a pool of UK credit card receivables originated by HSBC Bank plc (AA-/Stable/F1+). The master trust structure was set up in 2006 and there has been one account addition to date, which occurred in December 2013. Series 2011-1, which was also rated by Fitch, has been repaid in full; Series 2012-1 is currently the only outstanding series of notes issued by the trust.
KEY RATING DRIVERS
The affirmation reflects the unchanged credit enhancement (CE) for both classes of notes and our steady state expectation of the trust's performance.
CE remains unchanged since issuance at 12.5% for Class A and at 6.5% for Class B. Delinquency levels are low, with total 30+ day delinquencies below 1.5% and 90-180 day delinquencies just over 0.5%. The portfolio has continued to outperform expectations, with charge-offs having remained below 2% throughout 2015, compared with the 4.5% base case assumption. We do not expect charge-offs to increase in the short term given that total 30+ day delinquencies have been below 1.0% in the last four months and +90 day delinquencies reached an historical low for the trust at 0.4% as of September 2015. The portfolio yield has averaged 19.5% over the past 12 months, which is a reduction of about 2% since September 2014 and the monthly payment rate (MPR) has continuously been above 30%, beating expectations of a 14% portfolio yield and a MPR of 26%.
Fitch has not revised its base case assumptions despite the better than expected performance as the base cases reflect our steady state expectation. In addition, it is not clear at the moment to what extent reward programmes, which are primarily financed through interchange fees, will be affected and what the impact on cardholder payment behaviour.
In Fitch's view, the main rating drivers for credit card transactions are charge-offs, the MPR and the portfolio yield. Based on the latest reports on the performance of the trust, the notes could withstand additional shocks with limited rating impact; only a combined deterioration of the rating drivers is expected to put the ratings under pressure.
Key Rating Drivers and Rating Sensitivities are further described in the Series 2012-1 New Issue Report published on 28 June 2012.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis.
Prior to the closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information for both transactions. The assessments indicated no adverse findings material to the rating analysis.
Overall Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
- Monthly investor reports provided by HSBC Bank plc, up to 15 October 2015.