Feb 12 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Shinhan Card 2011-2 International Ltd (Shinhan 2011-2), Shinhan Card 2011-3 International Ltd (Shinhan 2011-3) and Shinhan Card 2012-1 International Ltd (Shinhan 2012-1). All of the transactions are securitisations of credit card receivables in South Korea originated by Shinhan Card Co., Ltd. (Shinhan Card; A-/Stable/F2).
The rating actions are as follows:
USD100m floating-rate notes due March 2015 affirmed at 'AAAsf'; Outlook Stable
USD300m floating-rate notes due November 2016 affirmed at 'AAAsf'; Outlook Stable
USD400m floating-rate notes due March 2017 affirmed at 'AAAsf'; Outlook Stable
KEY RATING DRIVERS
The affirmations reflect Fitch's view that the performance of the underlying assets has remained well within expectations, and that credit enhancement is sufficient to support the current ratings. Credit enhancement has increased for Shinhan 2011-2 since it entered into the controlled amortisation period in September 2013. Delinquencies have been low and payment rates have remained stable for all three transactions since closing. Improved economic growth and low unemployment rates in South Korea have continued to support the underlying transactions, despite high household debt levels.
Fitch expects delinquencies to remain stable over the next 12 months, supported by a more favourable product mix that emphasises lower-risk card receivables. The eligibility criteria Fitch uses to assess the underlying pools and the agency's conservative base case assumptions show the transactions have sufficient protection for the current ratings. This is reflected in the Stable Outlooks.
According to the December 2013 servicer reports, the three-month rolling average delinquency ratio was 0.06% for all three transactions, well below the transactions' 2% early amortisation trigger.
The three-month average annualised net yield was 4.93% for Shinhan 2011-2, 5.53% for Shinhan 2011-3 and 4.54% for Shinhan 2012-1, compared with the transactions' trigger of 0%. The three-month average payment rate was 64.38% for Shinhan 2011-2, 71.37% for Shinhan 2011-3 and 68.46% for Shinhan 2012-1, well above the transactions' trigger of 35%.
Shinhan 2011-2's notes have an expected maturity of 26 March 2014. Fitch believes it is unlikely that a downgrade will be considered for this transaction, given the transaction's sound performance and the short period to scheduled maturity.
For Shinhan 2011-3 and Shinhan 2012-1, Fitch uses two different scenarios when evaluating the rating sensitivities of the rated notes: 1) increased defaults; and 2) a reduction in monthly payment rate (MPR). Assuming that the current product mix, the payment rate and the net yield of the portfolio remain unchanged from the levels reported in the December 2013 servicer reports, an increase of annualised default rates to 31% may lead to a downgrade of Shinhan 2011-3 and Shinhan 2012-1. Assuming that the current product mix, the annualised default rate and the net yield of the portfolio remain unchanged from December 2013 levels, a decrease of MPR to below 21% may lead to a downgrade of Shinhan 2011-3 and Shinhan 2012-1.
The initial key rating drivers and rating sensitivities are explained in the new issue report of each transaction, available at www.fitchratings.com.
A comparison of Shinhan 2012-1's representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports given under Related Research below.