Discover Bank is sponsoring a half-billion dollar credit card asset-backed securities (ABS) deal that will bring the total number of class A notes outstanding under the Discover Card Execution Note Trust (DCENT) to 16—including notes form previous deals.
With a credit enhancement level of 21%, the transaction, DCENT (2022-2) will issue about $500 million in notes from a single class A tranche, to which Fitch Ratings expects to assign a ‘AAA’ rating.
Noteholders should begin to receive payments in June from the transaction, which has an expected maturity date of March 15, 2025, according to the rating agency.
After issuing the transaction, 16 series of Class ‘A’ notes will be outstanding under DCENT, Fitch said.
“The total invested notes outstanding will be $11.2 billion, with $8.1 billion of class ’ notes, $1.0 billion of class B notes, $1.1 billion of class C notes and $.0958 billion of class D notes,” according to Fitch’s report.
RBC Capital Markets, LLC, Citigroup Global Markets Inc., and Wells Fargo Securities are underwriters on the transaction. Discover Bank is the originator and servicer, while Discover Funding is the depositor. U.S. Bank, N.A. serves as trustee, according to the rating agency.
Incorporated since 1911 under the name Greenwood Trust Company, Discover Bank is based in Delaware. Fitch rates the company ‘BBB+/F2,’ with a stable outlook.
Fitch noted several reasons for confidence in the transaction, from a credit perspective, including that DCENT’s financial profile is trending in a positive direction. The company’s monthly payment rate increased to a 12-month average of 29.6%, an increase from 24.92% the previous year, Fitch said.
The average yield is 19.0% and the three-month average excess spread from over the past 12 months ranged from 14.0% to 15.5%.
The charge off rate is 2.11% lower than the prior year’s average of 2.7%. The more than 60-day delinquencies are below 1% for the 12 month average.
By the end of April, receivables totalled $24.1 billion on accounts that are seasoned at least 60 months.
“The average active account balance was just under $3,000 and the average credit limit was $13,458,” Fitch reported.
