S&P: Var Credit Card-Backed ABS Deal Rtgs Off Watch.Business Editors NEW YORK--(BUSINESS WIRE)--Aug. 18, 2003 Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. today removed its ratings on various privately rated ABS (Automatic Backup System) See backup program. transactions backed by subprime credit card receivables from CreditWatch following a review of portfolio performance and the application of revised criteria for purchase rate assumptions. On March 25, 2003 Standard & Poor's placed its ratings on all uninsured privately rated classes of certain credit card master trusts backed by subprime bankcard bank·card n. A card issued by a bank authorizing the holder to receive bank services and often functioning as a debit card. portfolios with loss rates in excess of 10% that have been originated, transferred, and serviced by banks that have unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. senior credit ratings below investment-grade, or are not rated by Standard & Poor's on CreditWatch with negative implications. The CreditWatch placements followed recent regulatory actions and events surrounding NextBank N.A. (NextBank) and First Consumers National Bank (FCNB FCNB First Consumers National Bank ). Specifically, the failure to sell the portfolios, closing of account lines, and subsequent deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in master trust collateral performance were the primary reasons prompting the review of these transactions and revision of purchase rate criteria. When rating credit card backed securitizations, cash flow models are used to measure the impact of deterioration in portfolio performance. Expected portfolio performance is stressed with increasing severity for higher ratings and a probabilistic (probability) probabilistic - Relating to, or governed by, probability. The behaviour of a probabilistic system cannot be predicted exactly but the probability of certain behaviours is known. Such systems may be simulated using pseudorandom numbers. approach has been applied to purchase rate assumptions based on the rating of the transferor. Portfolio yield, charge-off, payment, and purchase rates are stressed simultaneously to varying degrees based on the rating assigned to the asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. . While portfolios are assumed to decline rapidly and purchase rates are modeled dramatically lower than historic base cases under stressed modeling scenarios, the scenario where all accounts would be closed, regardless of individual account profitability or delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. status, was not previously considered to be a realistic possibility. However, based on recent regulatory precedent, Standard & Poor's has increased the severity of its stressed case purchase rate cash flow modeling assumptions for high loss master trusts when the seller certificate is held by a non-investment-grade or unrated bank. The following table reflects Standard & Poor's revised purchase rate assumptions for ABS backed by subprime credit card receivables. While the table indicates a range of purchase rate assumptions for each bond rating category, the actual purchase rate assumption that will be utilized for a particular issuer will be differentiated based upon the seller/servicer rating. Generally, the lower the credit quality of the seller/servicer, the more severe and closer to zero the purchase rate assumption will be. Seller/Servicer Bond Rating Rating AAA AA A BBB BB BB - B 1.0%-.50% 2.0%-1.50% 3.0%-2.50% 4.0%-3.50% 5.0%-4.50% CCC,CC, or unrated .50%-0% 1.0%-.5% 1.5%-.75% 2.0%-1.0% 3.0%-1.25% The change regarding purchase rate assumptions applies to ABS backed by subprime card receivables from bank originators in the non-investment-grade category. The purchase rate assumption incorporates a probabilistic approach tied to the financial strength of the seller/servicer. As an issuer drops further out of the investment-grade realm, there is greater likelihood of receivership receivership In law, state of being in the hands of a receiver, a person appointed by the court to administer, conserve, rehabilitate, or liquidate the assets of an insolvent corporation for the protection or relief of creditors. and potential for the regulators to restrict loan originations The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. . Purchase rate assumptions for investment-grade issuers and prime portfolios remain unchanged, and continue to range from 2% to 5% based on the ratings assigned to the asset-backed securities and the seller/servicer, respectively. Also, this exercise did not include retailer receivables in rated private label trusts, since the purchase rate assumptions utilized in those deals are generally more severe, and in many cases are modeled at 0.0%. Based on these revised purchase rate assumptions (assuming no change in assumptions related to yield, losses, or payment rate is warranted), in most cases, a one-category downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. with respect to the rating of the seller/servicer should not result in a credit cliff Credit Cliff A slang term referring to the compounding of a company's credit deterioration caused by provisions such as financial covenants, or events that trigger a change in the company's credit rating. for outstanding securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. bonds. Furthermore, in those instances where a financial institution has been shut down by regulators, a 0.0% purchase rate assumption will be utilized. Consequently, the current ratings assigned to series issued out of the NextCard Credit Card Master Note Trust, First Consumers Master Trust, and First Consumers Credit Card Master Note Trust, reflect a 0.0% purchase rate assumption. The unsuccessful attempt by the Federal Deposit Insurance Corp. (FDIC FDIC See: Federal Deposit Insurance Corporation FDIC See Federal Deposit Insurance Corporation (FDIC). ; as receiver for NextBank N.A.) and FCNB (as seller/servicer for the First Consumers Master Trust and First Consumers Credit Card Master Note Trust) to sell the related portfolios of credit cards, as well as the continued poor receivables performance, ultimately resulted in the closing of the open-to-buys associated with the underlying accounts. The closing of consumer accounts and subsequent loss of credit card use was followed by significant further deterioration in portfolio performance, resulting in the downgrading downgrading A reduction in the quality rating of a security issue, generally a bond. A downgrading may occur for various reasons including a period of losses, or increased debt service required by restructuring a firm's capital to include more debt and less of the rated certificates. Furthermore, ratings on series issued out of the Metris Master Trust (Metris), which were previously placed on CreditWatch negative March 14, 2003 due to performance-related issues, were also included in this subprime review. Recent rating actions taken with respect to various Metris series on July 23, 2003 (see press release "Ratings on Various Metris Master Trust-Related Transactions Lowered and Off CreditWatch" dated July 23, 2003) incorporated the review of overall portfolio performance, increased possibility of a servicer transfer, and the lower purchase rate assumptions as OCC OCC See: Options Clearing Corporation OCC See Options Clearing Corporation (OCC). (Office of the Comptroller of the Currency The Office of the Comptroller of the Currency (or OCC) was established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States. ) oversight
Oversight may refer to:
In total, Standard & Poor's review encompassed the uninsured ratings of 38 publicly and privately rated classes across 22 series issued out of two separate master trusts. All of the ratings on ABS backed by subprime credit card receivables currently reflect the change in the purchase rate assumption. Those ratings previously placed on CreditWatch negative, with the exception of those pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to First Consumers transactions, which remain on CreditWatch negative due to ongoing concerns related to performance, have been resolved and removed from CreditWatch. CURRENT RATINGS NextCard Credit Card Master Note Trust Asset-backed notes series 2000-1 Class Rating A BBB- B B- C CCC- D CC NextCard Credit Card Master Note Trust Asset-backed notes series 2001-1 Class Rating A BBB- B B- C CCC- D CC First Consumers Master Trust Series 1999-A Class Rating A BB/Watch Neg B CCC/Watch Neg First Consumers Credit Card Master Note Trust Series 2001-A Class Rating A BB/Watch Neg B CCC/Watch Neg C CCC/Watch Neg Metris Master Trust Series 2000-1 Class Rating A A B BBB Metris Master Trust Series 2000-3 Class Rating A A B BBB Metris Master Trust Series 2001-1 Class Rating A AA- B BBB+ Metris Master Trust Series 2001-2 Class Rating A A B BBB Metris Master Trust Series 2001-3 Class Rating A A B BBB Metris Master Trust Series 2001-4 Class Rating A A B BBB Metris Master Trust Series 2002-1 Class Rating A A B BBB Metris Master Trust Series 2002-2 Class Rating A A B BBB Metris Secured Note Trust Series 2000-1 Class Rating Notes B+ Metris Secured Note Trust Series 2000-2 Class Rating Notes AAA Metris Secured Note Trust Series 2000-3 Class Rating Notes B+ Metris Secured Note Trust Series 2001-1 Class Rating Notes BB Metris Secured Note Trust Series 2001-2 Class Rating Notes B+ Metris Secured Note Trust Series 2001-3 Class Rating Notes B+ Metris Secured Note Trust Series 2001-4 Class Rating Notes B+ Metris Secured Note Trust Series 2002-1 Class Rating Notes B+ Metris Secured Note Trust Series 2002-2 Class Rating Notes B+ Copyright 2003, Standard & Poor's Ratings Services |
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