Comenity Bank is marketing $333.3 million of bonds backed by credit card receivables from its World Financial Network Credit Card Master Note Trust, according to Fitch Ratings.
The Series 2016-A consist of four tranches of notes with a final maturity date of April 2025: $250 million of senior notes rated ‘AAA’ benefit from 25% credit enhancement, $12.5 million of ‘AA’ rated notes have 21.25% credit enhancement, $15.8 million of ‘A+’ rated notes have 16.5% credit enhancement and $41.7 million of ‘BBB-‘ rated notes have 4% credit enhancement.
Only two senior most tranches will be sold to investors. Comenity will retain the A+ and BBB- rated tranches, as well as a $13.3 million unrated tranche.
The notes are backed by a pool of receivables arising under Comenity Bank, private-label revolving credit card accounts generated through private-label programs of multiple retailers.
With the issuance of series 2016-A, there will be 11 term series outstanding in the master note trust, with principal receivables totaling approximately $6.58 billion as of May 31, 2016. During the same period, the active accounts designated for the trust portfolio had an average principal receivables balance of $440 and an average credit limit of $1,514. The average utilization rate for all accounts was 6.4%, and for active account was 29.1%. As of the same period, the average seasoning of the accounts in the trust was approximately 73 months.
According to Fitch, the trust is geographically diverse, with receivables originated in the top five states Texas, California, Illinois, New York and Florida representing 39.67% of the outstanding receivables pool.
In its presale report, the rating agency noted that chargeoffs have increased in recent periods, although they continue to be well below crisis levels. As of the May 31, 2016 period, gross chargeoffs were 8.19% compared with a 12-month rolling average of 7.95% and an average of 8.51% since 2004.
