BMO, TD Bank Plan ABS Deals In U.S, Canadian Dollars

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Bank of Montreal (BMO) and Toronto-Dominion Bank are each backing split-denomination ABS transactions of their Canadian credit-card receivables.

The notes in BMO's Master Credit Card Trust II 2016-3 are divided between a Class A stack of U.S. dollar-denominated tranche maturing in 2022, with a 5.5% subordination. The Class B Canadian-dollar notes carry a 3.5% subordination. At the bottom of the capital stack is a series of Class C notes, also in Canadian currency.

BMO has not determined the tranche sizes.

TD Bank, through its Evergreen Credit Card Trust, is planning a transaction with $500 million in U.S. dollar-denominated Class A notes and two subordinate structures of Canadian-currency securitizations. The sizes of the Class B and C tranches backed by TD receivables are undetermined.

Moody’s Investors Service has assigned provisional structured finance ratings to the deal. The Class A notes are rated ‘Aaa’; the Class B notes at ‘Aa3’ and subordinate Class C notes at ‘Baa1’.

The accounts in the 2016-3 pool are well-seasoned, according to Moody’s, with over 50% of the accounts aged 10 years or more. Only 26.7% of the accounts have been opened within the last five years.

Moody’s noted an increase in the average net charge-off rate for the first four months of the year at 3.16%, an increase from 2.98% in 2015. But 30-day plus delinquencies within the trust decreased to 2.73% from 2.8% in 2015 and 3/07% in 2014. In addition, the trust’s average monthy payment rate for the first six months of the year was down only slightly to 45.6%, but is still above the 2014 average of 43.6%.

More than 67% of the pool’s accounts are held by cardholders with prime FICO scores of 700 or greater.

BMO’s previous Master Card Trust series – 2016-2 issued in late April– consisted only of Canadian-dollar receivables in a similar three-class note structure that totaled $220 million. The trust’s first issuance of the year was a $476 million deal in U.S. dollar-denominated accounts.

BMO, which has been securitizing receivables since 1997, has approximately CAN$7.5 billion in outstanding credit card receivables in the trust as of April 30.

Evergreen Credit Card Trust Series 2016-2 is a pool of credit-card receivables backed by accounts originated from TD Bank. The Class A notes feature 6.5% credit support, while the Class B tranche of Canadian-dollar notes of fixed-rate assets will carry a 2.5% credit enhancement over subordinate, fixed-rate Class C notes.

The A notes carry preliminary triple-A ratings from Fitch Ratings and Standard & Poor’s.  The Class B notes are rated ‘A’ by S&P and by Fitch, while the Class C notes are ‘BBB’-rated by both ratings agencies.

TD Securities and JPMorgan are the underwriters. The deal is expected to close July 13.

This is the second series issued out of the linked master trust and is TD’s second credit-card ABS issuance since 2003.

For the six-month period ending April 30, the Evergreen trust’s average monthly portfolio balance was approximately $7.95 billion covering 4,405,884 accounts.  The average monthly payment rate is 48.8% - lower than its rate in 2015 and 2014 - with a total average delinquent receivables percentage of 6.35% (similar to 2015’s rate, but higher than rates recorded in the three prior years).

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