Research: Rating Action: Moody’s assigns definitive rating to Golden Credit Card Trust, Series 2022-3 Class A Notes

Toronto, July 22, 2022 – Moody’s Investors Service (Moody’s) has assigned a definitive Aaa (sf) rating to the Series 2022-3 Class A Notes issued by Golden Credit Card Trust (Golden), sponsored by Royal Bank of Canada (RBC , long-term deposits / long-term senior unsecured Aa1, stable, long-term CR assessment Aa1 (cr), BCA a2, and short term deposit P-1). Moody’s also announced today that the issuance of the Series 2022-3 Notes would not, in and of itself and as of this time, result in the downgrade or withdrawal of the ratings assigned to any class of outstanding securities issued by Golden.

Moody’s rating action is as follows:

Issuer: Golden Credit Card Trust, Series 2022-3

$ 1,000,000,000 Class A Notes, Definitive Rating Assigned Aaa (sf)

RATIONALE RATINGS

The rating is based on the quality of the underlying credit card receivables, the expertise of RBC as servicer, the transaction’s legal and structural protections including early amortization trigger events, the credit enhancement provided by the subordinate Class B and Class C Notes in the 2022- 3 series, and the likelihood of the sponsor becoming insolvent and shutting down its credit card portfolio. Moody’s assesses this likelihood from the sponsor’s counterparty risk assessment (CR assessment).

The Class A Notes represent 93.50% of the total issuance, the Class B Notes represent 4.50% and the Class C Notes represent the remaining 2.00%. Class A Notes were issued in US dollars and will have a floating rate coupon indexed to compounded SOFR plus 1.20%. The Class B and Class C Notes were issued in Canadian dollars and will have fixed rate coupons of 5.793% and 6.843%, respectively. Golden has minimized the risk of an interest rate and currency mismatch by entering into a cross-currency and interest rate swap agreement related to the Class A Notes, with RBC as swap counterparty.

The expected maturity date of the securities is 16 July 2029, and the legal maturity date is 15 July 2031.

The assets of Golden consist of co-ownership interests in credit card receivables originated and serviced by RBC.

Summary of Analytical Outputs

Moody’s Aaa LGSD and the Aaa CE are 20.3% and 4.7%, respectively for this transaction. The Aaa LGSD reflects Moody’s expectation of the trust’s performance following a sponsor default and portfolio shutdown. The Aaa CE reflects the level of credit enhancement consistent with a Aaa (sf) rating by haircutting the Aaa LGSD based on the CR assessment of the sponsor.

Methodology Underlying the Rating Action:

The principal methodology used in this rating was “Moody’s Approach to Rating Credit Card Receivables-Backed Securities” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/390486. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the rating:

Moody’s could downgrade the rating of the Class A Notes if our expectation of the trust’s performance following a sponsor default and portfolio shutdown (ie, Aaa LGSD) deteriorates materially, specifically, if the charge-off rate rises or the payment rate or yield falls. A downgrade to the sponsor’s CR assessment could also lead to a downgrade to the rating of the Class A Notes.

REGULATORY DISCLOSURES

For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

Moody’s either did not receive or take into account one or more third-party due diligence assessment (s) regarding the underlying assets or financial instruments (the “Due Diligence Assessment (s)”) in this credit rating action.

The Due Diligence Assessment (s) referenced herein were prepared and produced solely by parties other than Moody’s. While Moody’s uses Due Diligence Assessment (s) only to the extent that Moody’s believes them to be reliable for purposes of the intended use, Moody’s does not independently audit or verify the information or procedures used by third-party due-diligence providers in the preparation of the Due Diligence Assessment (s) and makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of the Due Diligence Assessment (s).

Further information on the representations and warranties and enforcement mechanisms available to investors are available on https://ratings.moodys.com/documents/PBS_1337006.

In rating this transaction, Moody’s uses a cash flow model to determine the collateral loss in a maximum stress scenario. As a second step, Moody’s haircuts this collateral loss based on the sponsor’s credit quality. Finally, Moody’s compares the available credit enhancement with the haircut collateral loss, taking into account loss allocation and other structural features, to determine the model-indicated rating for each instrument.

Moody’s quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows.

For ratings issued on a program, series, category / class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category / class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer / deal page for the respective issuer on https://ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity (ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK . Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the issuer / deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Aliya Ehmar
Asst Vice President – Analyst
Structured Finance Group
Moody’s Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Richard Hunt
Senior Vice President / Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody’s Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Leave a Comment

Your email address will not be published. Required fields are marked *