Advanta Credit Card Master Trust II’s $966 million class A and $86.25 million class B floating-rate asset-backed certificates, series 1998-A, are expected to be rated ‘AAA’ and ‘A’, respectively, by Fitch IBCA. With a weighted average life of three years, the securities represent the trust’s first issuance since series 1996-E, which was sold in November 1996.
The expected ratings are based on the strength of the pool of receivables generated under Advanta National Bank (ANB) MasterCard and Visa accounts, available credit enhancement, servicing provided by ANB and sound legal and cash flow structures.
For the January 1998 distribution date, trust chargeoffs increased to a level of 7.47%, the highest level since July 1997. Additionally, monthly payment rate has remained stable the last six months, averaging above 11.0%, while yield has increased due to a majority of accounts being risk based priced, which has resulted in a stable three month average excess spread level above 5%.
Credit enhancement for the class A certificates initially totals 18.0% and is comprised of 7.5% subordination of the class B certificates, 8.5% collateral interest and 2.0% cash collateral account (CCA). Class B certificates are initially enhanced 10.5% by the collateral interest and the CCA, respectively. The CCA will be funded an additional 50 basis points (bps) after closing from excess finance charge collections, increasing it to 2.5% as well as increasing overall enhancement for the class A certificates to 18.5% and the class B certificates to 11.0%.
With the levels of credit enhancement available, series 1998-A can withstand simultaneous declines of 35% in portfolio yield and 40% in monthly payment rate, while chargeoffs increase to a level of 34% and still make full interest and principal payments to class A investors. Class B enhancement covers simultaneous declines of 25% in portfolio yield and 30% in monthly payment rate, while chargeoffs increase to a level of 23%. In addition, to address the interest rate and basis risk associated with uncapped floating coupons, the available enhancement enables a coupon stress to historic-high LIBOR levels without a corresponding increase in portfolio yield. Furthermore, investors are protected from a deterioration in credit quality by early amortization events, which would trigger an early payout of investor principal.
Class A and B certificateholders will receive monthly interest payments of 4 bps and 24 bps over one-month LIBOR, respectively, throughout the revolving and accumulation periods and on the scheduled payment date, provided an early payout event does not occur. Interest will be paid on the 15th of each month commencing April 1998. Following a variable accumulation period, principal is expected to be paid to class A certificateholders on the January 2001 distribution date and to class B certificateholders one month later. The series termination date is July 2003. As part of Group One, series 1998-A will share excess principal and finance charge collections with 14 other Group One series.
For information about performance on any outstanding Advanta CCMT II series please refer to Fitch IBCA Asset-Backed Surveillance on the Internet at ‘ ‘ or on Bloomberg by typing ‘FTC’ ‘GO’.Details