Nov 16 (IFR) - Barclays recently priced its first
asset-backed security backed by US credit card receivables, in a
bid to diversify funding sources for its US lending business and
gain a bigger share of the American cards market.
The bank's US$1bn Dryrock Issuance Trust Series 2012-1 and
2012-2, the sponsor/servicer of which is Barclays Bank Delaware,
was the first Reg AB-compliant platform for Barclays,
and the first credit card trust to be compliant with the Federal
Deposit Insurance Corporation (FDIC) Safe Harbor Rule.
The SEC's Reg AB rule, created in 2005, governs the
requirements for the registration, disclosing and reporting of
all ABS, while the FDIC rule clarifies how the FDIC treats
securitization if it becomes the receiver of a failed bank.
The portfolio underpinning the Dryrock transaction consisted
of VISA, MasterCard and American Express accounts originated by
the bank, and was viewed as a positive for the credit card
market, which has been shrinking, according to securitization
"This is a path to diversify our funding sources for the
business," said Jerry Pavelich, chief financial officer of
Barclaycard US. "All we're trying to do with our mix of funding
is diversify and assure we have funds at attractive rates and a
variety of sources."
Over a year ago, Barclays moved into the retail deposit
business, and now has about US$1bn. "We said that we would add
securitization to the mix when the time was right," Pavelich
said. "Now, between the mix of broker deposits, our online
presence, and securitization, we like the look and feel of how
we fund our business. We're less reliant on intercompany
Barclaycard's US business has been on a positive growth
trajectory. In 2007, the business was at US$4bn in total
outstandings, rising close to US$10bn by 2008. While things
slowed down after the crisis, outstandings started growing again
to US$13bn by the end of the second quarter this year.
The bank's co-branded model has recently succeeded in
tempting key relationships away from some of its competitors.
For instance, earlier this year Sallie Mae dropped Bank of
America and chose Barclays for its UPromise college-savings
credit-card program, which offers rewards for college students
in exchange for spending with the card.
Barclays also won a US$700m portfolio for Resorts
Condominiums International (RCI), a timeshare owner. The
Mastercard program offers elite rewards for these owners.
Pavelich said that the company had added US$2bn in
outstandings through acquisitions, and another US$1bn in
"organic" growth. "Other lenders are shrinking, while we are
growing," he said.
Amid restrictions by the Financial Services Authority in the
UK as to how large lending exposures can be, the only option for
the US arm of the company was to avoid intercompany funding. "If
we want to grow this business, we realized we had to diversify
our funding sources," said Deepash Jain, associate director of
Barclays Treasury. "Moreover, the FDIC encourages this
Jain says that US credit card ABS volume started picking up
this year after a lull, with nearly US$40bn from US and global
issuers selling bonds to American investors.
"The level of confidence in the Triple A market from both
investors and issuers led to increased volume," Jain
said. "Going forward, the growth hinges on several things: the
depth and breadth of investors, and the growth of credit card
Barclays Bank Delaware wants to be a programmatic issuer.
Depending on market conditions and funding requirements, the
bank hopes to tap the US ABS market one or two times a year,
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