People’s Bank Credit Card Master Trust’s $343.0 million class A and $27.0 million class B floating-rate asset-backed certificates, series 1998-1, are expected to be rated ‘AAA’ and ‘A’, respectively, by Fitch IBCA. This is the eighth issuance out of the People’s Bank Credit Card Master Trust. The ratings are based on the quality of the VISA and MasterCard receivable pool, available credit enhancement, People’s Bank’s underwriting and servicing capabilities, and the sound legal and cash flow structures.
Series 1998-1 class A benefits from credit enhancement totaling 14.25%, comprised of 6.75% subordination of class B and a 7.50% collateral interest amount (CIA). Class B, in turn, is protected by the 7.50% CIA.
Investors are further protected from prolonged exposure to deterioration in credit card performance and/or servicer default by early amortization events, which would trigger a rapid payout of principal. In addition, series 1998-1 benefits from the sharing of principal and finance charges with other designated series in the master trust.
With the levels of credit enhancement available, series 1998-1 can withstand a decline of 40% in monthly payment rates while chargeoffs increase to a level of 30% and still make full interest and principal payments to class A investors. The class B enhancement covers simultaneous decline of 30% in monthly payment rate while chargeoffs rise to a level of 21%.
The risk of increase in coupon rate to the master trust is capped at 9% at all times. However, class A and class B investors will receive additional interest above the stated cap level from the cap provider, Lehman Brothers Financial Products, Inc., which Fitch IBCA rates ‘AAA’. Upon the expiration of the cap agreement at the expected maturity of the series 1998-1, additional coupon expense on the remaining class A and class B invested amount that is above the 9% capped-rate will be paid from the available excess finance charges.
People’s Bank is a successful low cost provider of Visa and MasterCard credit cards nationwide, servicing roughly 2.3 million accounts with $3.2 billion in credit card receivables balance.Details