RPT-Fitch Affirms Swiss Credit Card Issuance's Notes

Tue Mar 25, 2014 7:40am EDT

(Repeat for additional subscribers)

March 25 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Swiss Credit Card Issuance's notes, as follows:

EUR351.1m No.1 Ltd. - Class A notes: affirmed at 'AAAsf'; Stable Outlook

EUR11.5m No.1 Ltd. - Class B notes: affirmed at 'Asf'; Stable Outlook

EUR7.4m No.1 Ltd. - Class C notes: affirmed at 'BBBsf'; Stable Outlook

EUR189.8m No.2 Ltd. - Class A notes: affirmed at 'AAAsf'; Stable Outlook

EUR6.2m No.2 Ltd. - Class B notes: affirmed at 'Asf'; Stable Outlook

EUR4m No.2 Ltd. - Class C notes: affirmed at 'BBBsf'; Stable Outlook

Swiss Credit Card Issuance is a programme created in June 2012 to issue note series collateralised by Swiss consumer credit card receivables originated by Credit Suisse AG (CS, A/Stable/F1). Both series were issued within the programme's linked note issuance structure.

KEY RATING DRIVERS

Since its creation the programme has shown stable performance that is in line with or better than Fitch's expectations. Sixty-180 days delinquency rates were 0.9% as of end-February 2014, significantly lower than in comparable transactions in the UK.

A favourable economic environment has supported programme performance, leading to fairly low charge-off rates since closing, with a current figure of 1.45%, based on the latest investor report. Average monthly payment rates (MPR) in the programme since closing have been above 65%, in line with historically high rates in the originator's books as most customers pay off the credit card balance every month. Portfolio gross yields have been above Fitch's expectations as well.

Fitch's outlook for the Swiss economy is stable, with accelerated growth throughout 2014. Unemployment is expected to remain around 3% which is the lowest among European peer countries. The economic environment is expected to be supportive for the programme in that no performance deterioration is expected. This is reflected in the Stable Outlook for the notes.

As CS is one of the largest commercial banks in Switzerland, numerous credit card customers hold deposits with the bank. This gives rise to potential deposit set-off claims by customers in case of an insolvency of CS. Furthermore, the high MPR exposes the series to elevated commingling risk. Nevertheless, these risks are, in Fitch's view, sufficiently mitigated by structural features and a comparably high variable seller share.

The series have benefited from significant excess spread since closing, providing the notes with a first layer of protection against charge-offs. Further, the class A notes benefit from overcollateralisation created by the subordination of class B and C notes, overall providing them with 5.1% credit enhancement. If excess spread decreases below certain threshold levels, excess spread will be trapped in a spread account to provide credit enhancement for the class C notes.

The notes pay a fixed-rate coupon on annual basis. Scheduled maturity for Swiss Credit Card Issuance No.1 Ltd is in June 2015, while Swiss Credit Card Issuance No.2 Ltd's scheduled maturity is in June 2016. Neither one of the transactions has started accumulating repaid principal; the length of the accumulation period for both series is dependent on the MPR.

RATING SENSITIVITIES

Fitch has maintained its base case assumptions set at the respective transactions' closing dates.

The notes' ratings are most sensitive to changes in the MPR as well as the charge-off rate.

Expected impact upon the note ratings of increased charge-offs (No.1 - A/No.1 - B/No.1 - C/ No.2 - A/No.2 - B/No.2 - C):

Current Ratings: 'AAAsf'/'Asf'/'BBBsf'/'AAAsf'/'Asf'/'BBBsf'

Increase base case charge-offs by 10%:

'AA+sf'/'Asf'/'BBBsf'/'AA+sf'/'Asf'/'BBBsf'

Increase base case charge-offs by 25%:

'AA+sf'/'Asf'/'BBBsf'/'AA+sf'/'Asf'/'BBBsf'

Increase base case charge-offs by 50%:

'AAsf'/'Asf'/'BBB-sf'/'AAsf'/'Asf'/'BBB-sf'

Expected impact upon the note ratings of reduced MPR (No.1 - A/No.1 - B/No.1 - C/ No.2 - A/No.2 - B/No.2 - C):

Current Rating: 'AAAsf'/'Asf'/'BBBsf'/'AAAsf'/'Asf'/'BBBsf'

Reduce base case MPR by 10%: 'AA+sf'/'Asf'/'BBBsf'/'AA+sf'/'Asf'/'BBBsf'

Reduce base case MPR by 25%: 'AAsf'/'Asf'/'BBBsf'/'AAsf'/'Asf'/'BBBsf'

Reduce base case MPR by 50%: 'BBB+sf'/'BBBsf'/'BBBsf'/'BBB+sf'/'BBBsf'/'BBBsf'

Expected impact upon the note ratings of increased charge-offs and reduced MPR (No.1 - A/No.1 - B/No.1 - C/ No.2 - A/No.2 - B/No.2 - C):

Current Rating: 'AAAsf'/'Asf'/'BBBsf'/'AAAsf'/'Asf'/'BBBsf'

Increase base case charge-offs by 10% and reduce base case MPR by 10%: 'AA+sf'/'Asf'/'BBBsf'/'AA+sf'/'Asf'/'BBBsf'

Increase base case charge-offs by 25% and reduce base case MPR by 25%: 'AA-sf'/'Asf'/'BBBsf'/'AA-sf'/'Asf'/'BBB-sf'

Increase base case charge-offs by 50% and reduce base case MPR by 50%: 'BBBsf'/'BBB-sf'/'BBsf'/'BBBsf'/'BBB-sf'/'BBsf'