CIBC is planning to issue additional notes backed by credit-card receivables from its CARDS II Trust, according to presale reports from Fitch Ratings, DBRS and Moody’s Investors Service.
The size of the 2017-1 series has yet to be determined, but the notes will be divided into two tranches: Class A, tranche of U.S.-dollar denominated notes and a Class B tranche of Canadian dollar-denominated bonds. Previous deals also have had such split tranches and exceeded US$1 billion in value.
The Class A notes in CARDS II Trust Series 2017-A will have an expected triple-A rating from Fitch and Moody’s. Because of CIBC’s high ratings as a sponsor and servicer, the notes only need be supported by a credit enhancement level of 7.25% of collateral pool assets plus a cash reserve account to be funded after closing. The notes will carry an interest rate tied to the one-month LIBOR.
The BBB-rated Class B notes to be denominated in Canadian dollars will benefit from credit enhancement consisting of the reserve account alone, and will carry an interest will be pegged to the Canadian Dollar Offered Rate (CDOR).
The size of the reserve account is yet to be determined, and will be funded when excess spread falls to or below 4%.
With the issuance of 2017-1, the trust will have four series outstanding totaling CAN$10.9 billion (US$7.94 billion) in receivables, with an average account balance of CAN$2,268. More than 77% of the accounts were older than five years.
Chargeoffs have been stable and delinquencies low in the CARDS II Trust for the past three years, outperforming similar card securitizations rated by Fitch. Its latest reported average yearly gross yield was 24.09%, slightly higher than the 23.2% yield reported in February 2016, Fitch’s presale report stated.
The trust was founded in 2004 to purchase and securitize interests in CIBC’s credit-card receivables.