Canadian Imperial Bank of Commerce is marketing its third series of notes backed by domestic credit-card receivables, and the second to be offered in U.S.-denominated bonds.
The US$539.1 million CARDS II Trust Series 2021-1 is a U.S. 144A securitization of monthly cardholder receivables from cards issued by CIBC in the Canadian market, and the first series to be issued since CIBC launched the CARDS II master trust platform in 2019.
That year, CIBC sponsored both a U.S.-dollar bond issuance as well as a CAD$750 million deal; those outstanding deals as well as Series 2021-1 are backed by the receivables totaling CAD$8.91 billion.
The new transaction features a Class A tranche of notes totaling US$500 million, supported by credit enhancement of 7.25% plus a cash reserve account that is to be funded in the event excess spread on the receivables falls to or below 4%. Fitch Ratings has assigned preliminary AAA ratings to the bonds.
Also being marketed are $25.6 million in Class B notes with a single A rating, and a $13.5 million Class C tranche rated BBB.
Coupons on the notes are to be determined.
The issuance is planned as the bank has seen a return to normalized chargeoff and delinquency levels from pandemic-related spikes in both categories. Earlier this year, CIBC’s credit-card portfolio had a brief jump in chargeoffs, rising to 3.43% in February from 0.32% in January as COVID-19 payment deferral agreements with cardholders began expiring and a portion of the accounts rolled over into delinquencies.
But the chargeoff rate improved to 0.88% in March, well below historical levels, as delinquencies also fell in line to pre-pandemic levels, according to Fitch.
Yields have also improved, after falling slightly to 19.71% in April 2020. Fitch’s report yields have returned to pre-pandemic levels at 22.23% as of the March 2021 collection period.
Over the past 12 months, three-month average excess spread has ranged between 11.91% and 17.79%.
HSBC Securities, BofA Securities, TD Securities and CIBC Capital Markets are lead underwriters on the deal.
