Moody’s Investor Service announced on Monday that it intends to review 34 classes of Capital One Bank credit card ABS for potential downgrade. The securities were issued out of the Capital One Multi-Asset Execution Trust (COMET).
This statement comes amid a separate ongoing review by Moody’s of the overall financial strength and long-term debt ratings of COMET sponsor Capital One Bank for possible downgrade.
A report by Wells Fargo Securities stated that the financial strength of the securitization sponsor will be a key aspect in the final ABS ratings. Specifically, the ratings firm will examine the sponsoring institution’s willingness and aptitude to maintain credit card utility in crisis conditions.
The Wells Fargo report also noted that Moody’s would exclude ABS maturing before January 2012 from its review and that any ratings downgrade is expected to surpass two notches.
COMET currently has approximately $15.3 billion in outstanding ABS, with $1.725 billion set to mature in the coming months of 2011 and about $9.7 billion maturing in the next there years. Wells does not anticipate what happens to the trust to affect the ABS market in a significant way due to Capital One's growing base deposit.
Wells Fargo analysts believe the motivation for the assessment of Capital One is a result of the firm’s recent announcement of its intention to acquire ING Direct for $9 billion.
This transaction will play a considerable role in the corporate ratings review by Moody's as both the integration of the two firms and ING Direct’s added $81 billion in deposit base were listed as factors in the process, according to the Wells Fargo Report.