Citibank is preparing to sponsor a $1.5 billion securitization of credit card receivables through the Citibank Credit Card Issuance Trust through two series, each offering one class of notes.
Ratings analysts at Fitch Ratings note that the two series, 2023-A1 and 2023-A2, are identical in almost every way. They have the same issuance amount, $750 million; the same initial hard credit enhancement level, 15.50%; and the same legal final maturity date of Dec. 8, 2027. Fitch also assigned ratings of 'AAA' to both classes of notes.
Aside from Citigroup Global Markets, Bank of America Securities, BNP Paribas Securities and Lloyds Securities are lead underwriters on the deal, the rating agency said.
As of the OCtober 2023 collection period, the pool of receivables had a chargeoff rate of 2.57%, which was higher than 1.81% one year prior. Delinquencies in the 60-day and over band have increased steadily and reached 0.99%, versus 0.62% in October 2022. mi
Those were just some of the transaction's initial key ratings drivers. In the past few years, the rating agency said, the pool has seen strong monthly payment rate levels, until April 2023, when it reached a record of 40.43%, Fitch said.
October's monthly payment rate was 36.49%, up from 35.22% for the same period the year before. Further, gross yield has continued to improve even in the current environment of higher interest rates, the rating agency said. Citibank's reputation as an effective originator and servicer is another key ratings driver. Should the company deteriorate, that might affect the collateral pool's performance.
Another highlight is that the credit card receivables are indexed to the prime rate, the rating agency said. Available credit enhancement, in the form of an increase in the 2009 certificate that provides subordination, helps to mitigate interest rate risks in the transaction, Fitch said.
As for the deal structure, Fitch notes that the A1 and A2 notes have a revolving period during which investors will receive fixed-rate and floating-rate payments, respectively. The A2 notes are pegged to the Secured Overnight Financing Rate (SOFR), Fitch said. When the revolving period concludes, the notes will enter the controlled accumulation period, which is slated to begin on December 2024. As of the closing date, the controlled accumulation is slated to last for 12 months. The servicer may elect to shorten that period, however.
The 2023-A1 notes pay on a semiannual basis, and begin on June 10, 2024, while payments on the 2023-A2 notes are monthly and begin on Jan. 9, 2024.
