After securitizing both dealer floorplan and business loan collateral this year, GE Capital is prepping an entrance into the credit card sector of the ABS market. While still in the preliminary stages, GE Capital unit Monogram Credit Card Bank of Georgia filed a preliminary prospectus with the Securities and Exchange Commission to securitize its private label and retail credit card originations.
According to the filing, GECC plans to issue the standard three-tranche senior/sub structure, down to the triple-B level. But sources close to the situation confirmed GECC is planning to utilize the de-linked master note trust structure that allows for issuers to opportunistically tap the market with large, index-eligible deals. The master note trust structure is currently a favorite of Citibank N.A., Bank One N.A., Capital One Financial and MBNA America Bank.
GE Capital declined to comment on its planned credit card securitization volumes and schedule, but the master note trust signals it plans to bring numerous large offerings to the primary market each year.
Monogram Bank is listed as originator/servicer with RFS Holding as the transferor. The receivables in the trust are presumably from GE Capital's retail and private label originations. GECC offers credit cards on behalf of home improvement chains Home Depot Inc. and Lowe's Co., as well as retail giant Wal-Mart, various units of The Gap Inc. and even the gas cards for ExxonMobil.
With more than 100 million accounts, totaling roughly $60 billion, GECC is one of the leading private label credit card issuers in the world. Loss rates for the portfolio sat at 6.5% through 2002 and, using GE's 2003 YTD estimate, would average 6.3% since 2001. Additionally GECC reports a steady 7% decline in cost per account since 1999, currently at $32.82 per account.
Filed under the moniker RFS Funding Trust, GE Capital/ Monogram Bank's first deal is tentatively slated for early 2004, sources said, following regulatory approval of the shelf and allotting for time to schmooze with investors. The move is just part of the larger corporate strategy shift away from reliance on ABCP and unsecured debt for funding. GE Capital had funded its receivables exclusively via its $30 billion-plus Edison Funding conduit.
GECC has duly increased its term securitization effort this year, having brought three transactions, totaling more than $2 billion. In prior years, however, GECC had been a sporadic ABS issuer at best, tapping the aircraft lease and equipment lease sectors one time apiece. GECC has also sold a pair of CMBS in 1998 and 1999.
Before this year, GECC's most recent ABS was in 2001, when it priced $1.4 billion of aircraft least ABS. At the time, it achieved the first-ever triple-A rating by Moody's Investors Service, due to "the strong servicing capabilities and global outreach of General Electric Capital Aviation Services as servicer and credit enhancement through subordination and a 5.8% liquidity facility segregated on a tranche by tranche basis," according to Moody's presale report.