Bank of America is coming to the securitization market to raise about $500 million, and the bank will secure the notes with a pool of undivided interests in prime credit card receivables that appear to be performing better over time, and issued through the BA Credit Card Trust.
Bank of America N.A. is the transaction's originator, sponsor and servicer, according to a pre-sale report from S&P Global Ratings. S&P intends to assign ratings to just one class of notes, 'AAA' to the class A notes.
The collateral's credit quality appears to have improved over the past several years, the rating agency noted. Receivables that have FICO scores greater than 720 have continued to rise steadily, while receivables with scores of less than 660 have declined.
The BA Master Credit Card Trust issued a collateral certificate that supports the various series of notes that the BACCT will in turn issue to investors. The deal will operate through a senior-subordinate capital structure with classes A, B and C notes.
According to S&P, the class A notes will have about 31.75% of credit support, owing to 11.25% support from subordination in the B notes and 10.0% subordination from the C notes. Overall, all of the BA notes receive 10.5% support of the total outstanding principal amount of the BA series notes, according to the rating agency.
The classes B and C need minimum subordination percentages of 14.2% and 12.6%, respectively, required to support the class A notes, the rating agency says.
S&P says it will only consider that class A will have 21.25% available to it under the 'AAA' stress scenario. Also, the rating agency notes, the trust receivables have been performing well through 2022. Further, the credit card receivables are geographically diverse and are from prime accounts with substantial seasoning.
The rating agency says that the 6.5% base-case loss assumption for BACCT is a forward-looking view that considers macroeconomic variables that could impact the timely performance of the receivables.
