Fitch Ratings last week released its inaugural crop of credit card ABS seller/servicer ratings, making it the third rating agency to use formalized assessments of credit card issuers' servicing capabilities. Fitch released ratings on First National Bank of Omaha, and sister company InfiCorp Holdings, HSBC Finance, MBNA America Bank, The Metris Companies and Providian National Bank.

"This is a required part of our rating analysis," said Kevin Duignan, managing director in Fitch's ABS group. Duignan added that Fitch has always reviewed seller/servicer operations, but has now phased in the formal review process. Eventually, Fitch hopes to rate all credit-card seller/servicers in the market - requiring that an issuer have a Fitch seller/servicer rating before it rates transactions. "We will be applying it to all seller/servicers and issuers of credit card ABS that we rate," he summed.

Duignan reported that Fitch will rate five more issuers before the end of the year, but declined to name the companies. The first five issuer ratings were chosen because they represent a good mix of the major players in the credit card sector including the leading players in the mid-to-subprime arenas. The five companies Fitch assigned ratings for with this move account for $103 billion in outstanding credit card ABS spread over 143 transactions Fitch rates.

Fitch's servicer ratings span a five-point numeric scale ranging from 1' to 5'. As per its style, Fitch may include a plus or a minus designation - excluding the greater-than-perfect 1+'. "An issuer with a higher seller/servicer rating could see a benefit to credit-enhancement levels," said Duigan.

In fact, MBNA - which received the relatively high ABPS/S1-' rating last Monday - saw $5.3 billion of class C MBNASeries subordinate bonds placed on watch for an upgrade just days later.

Issuers receiving the 5' rating would not likely see offerings rated by Fitch. Generally, Fitch plans to rate deals with seller/ servicers rated 3-' or lower.

Standard & Poor's was the first rating agency to formally rank credit card ABS seller/servicers, starting with a rating of Strong' to MBNA in October 2003 (see ASR, 10/6/03). S&P rates on a five-level scale from Strong,' to Weak.' S&P has rated two credit card issuers, FNBO at Above Average,' and Arrow Financial Services at Average.'

Moody's Investors Service began assigning seller/servicer ratings in March 2004, and has so far rated two issuers: First Financial Bank USA at SQ2' and FNBO at SQ3'. Moody's analyst Jason Grohotolski said that Moody's views the servicer rating market as being important and that he expects the number of companies Moody's rates to increase.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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