TEXT-S&P rates Discover Card Ext Nt Trust AA-plus (sf)

Mon Nov 19, 2012 1:01pm EST

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Nov. 19 - OVERVIEW

-- Discover Card Execution Note Trust's class B(2012-3) note issuance is an ABS securitization backed by undivided investor interest in Discover Card Master Trust I's series 2007-CC collateral certificate, which, in turn, is collateralized by receivables generated from designated Discover Card accounts.

-- We assigned our 'AA+ (sf)' rating to the class B(2012-3) notes.

-- The 'AA+ (sf)' rating reflects our view of the transaction's credit support, timely interest and principal payments, and payment and legal structures, among other factors. Standard & Poor's Ratings Services today assigned its 'AA+ (sf)' rating to Discover Card Execution Note Trust's $250 million class B(2012-3) DiscoverSeries notes. The note issuance is an asset-backed securities transaction backed by undivided investor interest in Discover Card Master Trust I's series 2007-CC collateral certificate, which, in turn, is collateralized by receivables generated from designated Discover Card accounts. The 'AA+ (sf)' rating reflects our view of:

-- The 19.0% credit support provided by the subordinated class B, C, and D notes, which we believe is likely sufficient to withstand the simultaneous stresses we apply to our 5.5%-7.5% base-case loss rate, 16.5%-18.5% base-case payment rate, 15.0%-17.0% base-case yield, and 1.5%-3.5% purchase rate assumptions for the notes. In addition, we used stressed excess spread and note interest rate assumptions to assess whether, in our opinion, sufficient credit support is available for the notes. All of the stress assumptions outlined above are based on our current criteria and assumptions (for more information, see "General Methodology And Assumptions For Rating U.S. ABS Credit Card Securitizations," published April 19, 2010, and "Revised Purchase And Payment Rate Assumptions For U.S. Credit Card ABS," published Sept. 14, 2011).

-- Our view that the 7% minimum seller's interest is sufficient in our stress scenarios to absorb dilutions, or noncash reductions, in the receivables.

-- Our expectation that under a moderate ('BBB') stress scenario, all else being equal, the 'AA+ (sf)' rating on the class B(2012-3) notes will remain within one rating category of the assigned rating in the next 12 months, based on our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010).

-- The credit risk that is inherent in the collateral loan pool based on our economic forecast, the master trust portfolio's historical performance, the collateral characteristics, and vintage performance data.

-- Discover Bank's servicing experience; and our opinion of its account origination, underwriting, account management, collections, and general operational practices.

-- Our expectation of timely interest and ultimate principal payments by the legal final maturity date, based on stressed cash flow modeling scenarios using assumptions that are commensurate with the assigned rating.

-- Our view of the notes' underlying payment structure, cash flow mechanics, and legal structure. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at "RELATED CRITERIA AND RESEARCH Related Criteria

-- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012

-- Revised Purchase And Payment Rate Assumptions For U.S. Credit Card ABS, Sept. 14, 2011

-- Principles Of Credit Ratings, Feb. 16, 2011

-- Methodology: Credit Stability Criteria, May 3, 2010

-- General Methodology And Assumptions For Rating U.S. ABS Credit Card Securitizations, April 19, 2010 Related Research

-- Presale: Discover Card Execution Note Trust - Class B(2012-3), Nov. 12, 2012

-- U.S. Economic Forecast: Long Time No See, Oct. 15, 2012

-- U.S. Credit Card Quality Index: Overall Improvements Are Expected To Continue Throughout 2012, Oct. 2, 2012

-- Industry Economic And Ratings Outlook: U.S. Credit Card ABS Fundamentals Remain Strong And Charge-Offs Are Low, Aug. 9, 2012

-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011

-- Discover Financial Services Inc., Oct. 18, 2011

-- Bulletin: Discover Financial Services Inc. Ratings Unchanged Following First-Quarter Results, March 23, 2011

-- Ratings On 950 North America Structured Finance Tranches On Watch Neg After Counterparty Criteria Update, Jan. 18, 2011 Temporary telephone contact numbers: Carl Neff (732-962-1547); Kelly Luo (917-273-3156). Primary Credit Analyst: Carl J Neff, CFA, New York (1) 212-438-2556;

carl_neff@standardandpoors.com Surveillance Credit Analyst: Kelly R Luo, New York (1) 212-438-2535;

kelly_luo@standardandpoors.com

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