In another instance of the asset-backed securities market inching toward globalization, United Kingdom-based Barclaycard will answer the recent U.S. foray into the U.K. by launching a $1 billion, U.S.-registered, dollar-denominated transaction backed by credit-card loans originated overseas - a first.
Evidence of the globalization effort began in September when General Motors Acceptance Corp. floated a $1 billion, Euro-denominated auto dealer floor-plan deal to European investors, followed by Puerto Rico-based Banco Popular issuing a dollar-denominated $195 million home-equity deal to an international audience.
"[The Barclaycard deal] is innovative because it's the first time ever for a large European banking institution to do something like this," said a source at Barclays Capital PLC, Barclaycard's U.S. component and lead manager.
"The structure of it looks very similar to a U.S. style master trust," said the source. "It's got the same kind of features, the same kind of pay out events. In other words, the deal is designed to look, smell, breathe, behave, etc., just like a credit card deal in the states."
The transaction will be structured as a three-year soft bullet, in three parts: a $950 million A class, a $50 million B class and a $50 million C class. The tranches are rated triple-A, single-A, and triple-B, respectively.
"I'll embellish this a little bit, but there's some truth to this," the source said. "It's probably the best performing credit card collateral I've ever seen, bar none."
The credit enhancement for the deal is 10% overcollateralization, which is lower than any other U.S. credit card deal in the market today, the source said.
"If the agencies looked at this deal, and they looked at the collateral, and they looked at the company - did their whole spiel - and came away and said, okay, triple-A level only needs to be 10%,' that's a huge vote of confidence."
What makes the deal unique is the strength of the portfolio, the source explained. Unlike most U.S. card deals, in which a portfolio's age typically ranges from 18 months to 24 months, the Barclaycard portfolio is more than 13 years old.
"The chargeoff rates are running between 2.5% and 2.7%, and that's where they've averaged for the past 10 years," said the source. "In the U.S., chargeoff rates average anywhere from 5.5% to 6.0%."
Investors should look at this deal as they would any similar benchmark U.S. credit card deal, the source said. "Look at where Citibank three-years are trading, or MBNA, or First USA, somewhere along those lines, to give you a sense of where the beast is actually trading," the source said.
