Fiducitation - Credit Card Securitization

Fiducitation - Credit Card Securitization http://www.fiducite.com/Fiducitations/Fiducitation - Credit Card Securitiz...
Author: Shahjehan Cheema, John Munson

Date: September 13, 2001 © 2001 Fiducite.com, Inc.
FIDUCITATION: A synthesis of public Internet resources on the topic.

INSTRUCTIONS: Use the Table of Contents to navigate the document. Each citation has up to four distinct
parts: Annotation, Clip, Source, and Cached File. Our Annotation and Clip (text or graphic from source
document) help you decide whether to view the document. The source document may be viewed by clicking on
the Source URL or by opening the embedded Cached File. All information is attributed to its source.
TABLE OF CONTENTS:
Synopsis
Overview of Credit Card Securitization
News and Trends
Performance and Forecasts
Major Deals
MBNA America Bank, N.A.
Rating Agencies
Fitch Ratings
Underwriters
This Fiducitation covers the facts about credit card securitization in the US, details some of the major deals in the
last year, and provides information on the leading issuers, the major rating agencies and the leading underwriters.
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ABCs of Credit Card ABS

Annotation: This 6 page report is an excellent overview of the credit card securitization market.
Clip: The credit card industry experienced rapid growth throughout the 1990s, with receivables outstanding
increasing from $185 billion in 1990 to $572 billion outstanding at year-end 2000.
Source: http://www.fitchinv.com/corporate/reports/report.cfm?rpt_id=124310
Cached File:
Facts About Credit Card Securitization 2001

Annotation: a general overview of the mechanics and variables of credit card securitization
Clip: The outstanding feature of credit card securitisation is the short cycle of the receivable - it is paid off within
4-5 months. Therefore, the usual amortization structures used in auto loans, etc. does not work handy in credit
cards.
Source: http://www.vinodkothari.com/creditcar.htm
Cached File:
Credit Card C-Piece Secretes

Annotation: very detailed and comprehensive report looking at credit card c-pieces, an enhancement structure of
credit card asset-backed securities (abs).
Clip: Although credit card ABS has been considered one of the most stable and widely accepted asset classes
in the ABS market, it is only recently that the C-pieces on credit card ABS have gained more acceptance and
sparked innovative structural developments.
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Source: http://www.fitchinv.com/corporate/reports/report.cfm?rpt_id=124482
Cached File:
Structured Finance - Credit Card Criteria

Annotation: broad ranging overview of credit card receivables from Standard & Poor’s rating services - (see
pp.6, 15, 21, 23, 41, 47-50, 64-74, 76-79)
Clip: One of the most important aspects of any credit risk assessment is the review of the originator’s
operations. In this review, emphasis is placed on the originator’s marketing, underwriting, and servicing
operations. A rating is based on the representations of the parties to the transaction, but the scope of the review
does not include an audit.
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Source: http://www.standardandpoors.com/ResourceCenter/RatingsCriteria/StructuredFinance/articles
/pdf/creditcard99.pdf
Cached File:
Risk and competition in the credit card industry

Annotation: working paper from 1998 with good chart exhibits, see figures 9, 15, 17 & 18 at bottom of page for
historical perspective on credit card securitization.
Clip: The term "convergence" refers to the growth of securitization of bank loans. Securitized credit card debt
has grown from zero to over $ 220 billion in 1997 (Figure 15). By then about half of the credit card debt was
securitized (Figure 9). Some banks have securitized more than two-thirds of their credit card portfolio (Capital
One 1998).
Source: http://munshi.sonoma.edu/working/cc/cc.html
Cached File:
Trading and Capital-Markets Activities Manual

Annotation: federal reserve's capital-market review manual. See supplement 5-april 2001 on pdf-document pages
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3-6 and table of contents on pdf-page 16 -- section 3020.1 Securitization And Secondary-Market Credit Activities.
Clip: The manual codifies current procedures used in the review of capital-markets and trading activities. It
discusses the risks involved in various activities, risk-management and -measurement techniques, appropriate
internal controls, and the examination process from the following perspectives:
Source: http://www.federalreserve.gov/boarddocs/supmanual/trading/trading.pdf
Cached File:
The following articles and press releases regarding credit card securitization are in chronological order:
Credit-Card Losses Keep Climbing June 2001

Annotation: brief article commenting on S&P's monthly index of securitized credit card receivables.
Clip: Losses among securitized credit-card accounts rose for the third consecutive month in May - and the
trend shows no signs of abating.
Source: http://www.absnet.net/include/showfreearticle.asp?file=/headlines/aba.htm
Cached File:
U.S. credit card ABS supply grows, Amex sells deal April 2001
Annotation: press release on American Express co. Credit card securitization with some insight into market and
reasons for increased interest in floating rate paper.
Clip: Market participants have favored short- to medium-term variable rate bonds like ABS, given the wild
swings in the stock and bond markets and uncertainty over how aggressively the Federal Reserve would lower
interest rates to revive a slowing U.S. economy.
Source: http://www.forbes.com/newswire/2001/04/10/rtr232275.html
Cached File:
Department Of Labor Proposes Expansion of ASB Exemptions August 2000

Clip: The Department of Labor has proposed an amendment to the “underwriter exemptions,” individual
exemptions that provide relief from certain ERISA prohibitions for the operation of asset pool investment trusts
and for the acquisition, holding and disposition of asset-backed and mortgage-backed certificates by ERISA
governed investors.
Source: http://www.mayerbrown.com/legal/teig_aug00.pdf
Cached File:
Consumer Federation of America- Recent Trends July 1998

Annotation: this article has some interesting statistics, including which banks extend the most credit and do so the
most prudently. Look for highlighted text.
Clip: Just as the portion of credit card debt held by banks has increased recently, so too has the portion held by
a few big banks. As the table below shows, at the end of last year, a few banks held more than half of all bank
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card debt.
Source: http://www.abiworld.org/research/cfa_credit_study_7-98.html
Cached File:
Charts, Tables, Graphs and General Information on Credit Card as well as other forms of Securitization
Standard & Poor’s Report on Credit Card Securitization Performance

Clip: Credit card charge-offs for securitized U.S. credit card banks rose substantially by 60 basis points (bps) in
April 2001, according to Standard & Poor's Credit Card Quality Indexes.
Source: http://www.standardandpoors.com/ResourceCenter/Reference/StructuredFinance/articles
/060501_creditcardindex.html
Cached File:
Moody’s Forecasts Bank Credit Card Segment of U.S. ABS

Clip: The bank credit-card backed segment of the U.S. public asset-backed securities (ABS) market should
reach a record-breaking $54 billion of issuance is 2001, up almost 25% from last year's $44 billion, says Moody's
Investors Service in its annual outlook on the segment.
Source: http://www.moodys.com/moodys/cust/research/babylon/Release/Rating%20Action
/noncategorized_number/2000400000337127.asp?namedEntity=Rating+Action
Cached File:
Moody’s Forecasts Private Label Credit Card Segment of U.S. ABS

Clip: The private label credit-card segment of the U.S. asset-backed securities (ABS) market is expected to
grow 28% in 2001 to approximately $5.5 billion worth of issuance, says Moody's Investors Service in an annual
review and outlook report.
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Cached File:
Standard & Poor's Report on CC Securitization Performance

Clip: Credit card charge-offs for securitized U.S. credit card banks rose substantially by 60 basis points (bps) in
April 2001, according to Standard & Poor's Credit Card Quality Indexes.
Source: http://www.standardandpoors.com/ResourceCenter/Reference/StructuredFinance/articles
/060501_creditcardindex.html
Cached File:
Moody's Forecasts Private Label Credit Card Segment Of U.S. Abs

Clip: The private label credit-card segment of the U.S. asset-backed securities (ABS) market is expected to
grow 28% in 2001 to approximately $5.5 billion worth of issuance, says Moody's Investors Service in an annual
review and outlook report.
Cached File:
Credit Cards: Use and Consumer Attitudes September 2000

Annotation: Federal reserve board research report on consumer related credit card issues, relates good data on
total (non-mortgage) outstanding consumer credit which can be used for sizing the market.
Clip: Credit cards have also become the primary source of unsecured open-end revolving credit, and they have
largely replaced the installment- purchase plans that were important to the sales volume at many retail stores in
earlier decades.
Source: http://www.federalreserve.gov/pubs/bulletin/2000/0900lead.pdf
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Cached File:
This section contains one list of deals by aba.com, and several press releases from major issuers detailing their
deals. The collection of press releases is not meant to be exhaustive, but rather to give you a sample of issuers.
ABSNet - DEALS
Annotation: Lists all the issuers of credit card securities in April - may 2001 in us, the total amount securitized,
and the number of deals each issuer has made.
(Note: to see other documents on this site, a free registration will be required.)
Source: http://www.absnet.net/WebSite/deals/browseassetclass.asp?AssetClass=cr&tab=browsedeals
Cached File:
ABSNet - Deal Summary For Providian May 2001

Annotation: An example of abs net’s deal summaries is given here using Providian bank.
Source: http://www.absnet.net/WebSite/deals/dealsummary.asp?DealID=441&tab=browsedeals&
BrowseType=CollateralTypes&FileName=Providian+Master+Trust&AssetClass=cr
Cached File:
Advanta Prices Securitization Backed by Small Business Credit Card Receivables April 2001
Annotation: 'Press release from Advanta corporation regarding recent pricing of business credit card
securitization.'
Clip: Advanta Business Card Master Trust Series 2001-A consists of receivables in a portfolio of business
revolving credit card accounts. The portfolio backs four classes of seven year, floating rate notes: $240 million of
Class A Notes, $28.5 million of Class B Notes, $21 million of Class C Notes and $10.5 million of Class D Notes.
Source: http://biz.yahoo.com/bw/010403/2696.html
Cached File:
AT&T unit to securitize $1 billion of credit card receivables May 1997

Source: http://www.att.com/press/0597/970507.uca.html
Cached File:
Fleet Credit Card Services Prices Credit Card Securitizations October 2000
Annotation: press release from fleet credit card services regarding pricing of credit card securitization.
Clip: The transaction, Fleet Credit Card Master Trust II, Series 2000-D, consists of one class of fixed rate
certificates, one class of floating rate certificates and one class of floating rate notes. The $733.5 million senior
Class A certificates has an expected average life of approximately 5 years, a coupon that will reset monthly and
was priced at one-month LIBOR plus 14 basis points.
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Source: http://www.fleetcards.com/info/pressroom.asp?press=19
Cached File:
MBNA securitized credit card receivables regularly in the past year. This folder contains mbna press releases
detailing these transactions.
MBNA Credit Card Securitization Press Releases

Annotation: MBNA press release page. By scanning this page you can see how often and for how much MBNA
has securitized credit card receivables.
Source: http://www.prnewswire.com/cgi-bin/micro_site.pl?Tick=mbna
Cached File:
MBNA Securitizes $1.0 Billion

Clip: WILMINGTON, Del., May 18 PRNewswire-- MBNA Corporation (NYSE: KRB) announced today that
MBNA America Bank, N.A., its wholly owned subsidiary, will issue $1.0 billion in credit card asset backed notes
through the new MBNA Credit Card Master Note Trust.
Source: http://www.prnewswire.com/cgi-bin/micro_stories.pl?ACCT=542850&TICK=MBNA&STORY=/www/story
/05-18-2001/0001497064&EDATE=May+18,+2001
Cached File:
MBNA Securitizes $750 Million Feb. 23, 2001

Clip: WILMINGTON, Del., Feb. 23 /PRNewswire/ -- MBNA Corporation (NYSE: KRB) announced today that
MBNA America Bank, N.A., its wholly owned subsidiary, will issue $750 million of ten-year credit card asset
backed securities. The securitization from the MBNA Master Credit Card Trust II features two classes of publicly
traded securities (Class A and Class B).
/02-23-2001/0001434318&EDATE=Feb+23,+2001
Cached File:
MBNA Securitizes $1.0 Billion Aug. 24, 2000
/08-24-2000/0001298076&EDATE=Aug+24,+2000
Cached File:
MBNA Securitizes $750 Million Nov. 8, 2000
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/11-08-2000/0001360779&EDATE=Nov+8,+2000
Cached File:
MBNA Securitizes $500 Million Dec. 6, 2000
/12-06-2000/0001381336&EDATE=Dec+6,+2000
Cached File: Rating Agencies
The rating agencies below are the three major rating agencies in the US.
Standard & Poor's Ratings Definitions

Clip: A Standard & Poor's issue credit rating is a current opinion of the creditworthiness of an obligor with
respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program
(including ratings on medium term note programs and commercial paper programs).
Source: http://www.standardandpoors.com/ResourceCenter/RatingsDefinitions.html
Cached File:
Moody's Ratings Definitions

Clip: Moody’s maintains five issuer rating systems: Senior Unsecured, Counterparty Ratings, Bank, Municipal
and Senior Implied ratings.
Source: http://www.moodys.com/moodys/cust/staticcontent/2000200000265735.asp?section=rdef
Cached File:
Fitch Credit Card Securitization Group

Clip: Fitch's presence in this sector has grown with market acceptance of its industry standard criteria for rating
subordinate tranches of credit card securitizations and its widely tracked performance indexes.
Source: http://www.fitchibca.com/corporate/sectors/credit_cards.cfm?sector_flag=1&marketsector=2
Cached File:
The citations below are included to give examples of Fitch ratings.
Fleet Credit Card Master Trust II
Source: http://www.fitchinv.com/corporate/ratings/issr_rtng.cfm?issr_id=6276
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Cached File:
MBNA Master Credit Card Trust
Cached File:
First USA Credit Card Master Trust
Cached File:
Top Underwriters of Public ABS in 2000, by Collateral Type
Source: http://abalert.com/Public/MarketPlace/Ranking/index.cfm?files=disp&article_id=49112
Cached File:
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Fiducitation - Credit Card Securitization

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Fiducitation - Credit Card Securitization http://www.fiducite.com/Fiducitations/Fiducitation - Credit Card Securitiz...

Author: Shahjehan Cheema, John Munson

FIDUCITATION: A synthesis of public Internet resources on the topic.

ABCs of Credit Card ABS

Facts About Credit Card Securitization 2001

Credit Card C-Piece Secretes

Structured Finance - Credit Card Criteria

Risk and competition in the credit card industry

Trading and Capital-Markets Activities Manual

Credit-Card Losses Keep Climbing June 2001

Department Of Labor Proposes Expansion of ASB Exemptions August 2000

Consumer Federation of America- Recent Trends July 1998

Standard & Poor’s Report on Credit Card Securitization Performance

Moody’s Forecasts Bank Credit Card Segment of U.S. ABS

Moody’s Forecasts Private Label Credit Card Segment of U.S. ABS

Standard & Poor's Report on CC Securitization Performance

Moody's Forecasts Private Label Credit Card Segment Of U.S. Abs

Credit Cards: Use and Consumer Attitudes September 2000

ABSNet - Deal Summary For Providian May 2001

AT&T unit to securitize $1 billion of credit card receivables May 1997

MBNA Credit Card Securitization Press Releases

MBNA Securitizes $1.0 Billion

MBNA Securitizes $750 Million Feb. 23, 2001

MBNA Securitizes $1.0 Billion Aug. 24, 2000

MBNA Securitizes $750 Million Nov. 8, 2000

MBNA Securitizes $500 Million Dec. 6, 2000

Cached File: Rating Agencies

Standard & Poor's Ratings Definitions

Moody's Ratings Definitions

Fitch Credit Card Securitization Group

The citations below are included to give examples of Fitch ratings.

Fleet Credit Card Master Trust II

MBNA Master Credit Card Trust

First USA Credit Card Master Trust

Top Underwriters of Public ABS in 2000, by Collateral Type

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