Royal Bank of Canada is securitizing its first Canadian credit-card receivables portfolio of the year in an asset-backed transaction through the Golden Credit Card Trust.
The sizes of the multi-currency three note tranches in GCDT Series 2017-1 deal are to be determined, with the floating-rate Class A series receiving preliminary triple-A structured finance ratings from Standard & Poor’s, Moody's Investors Service and bond rating agency DBRS.
The Class A notes, issued in U.S. dollar currency, will carry a coupon based on a spread above one-month Libor; the Class B and C notes (which will be Canadian currency) will be fixed rate.
The notes will be backed by Canadian credit-card receivables originated by RBC, which has approximately CAN$17 billion (US$13.03 billion) of receivables in its managed portfolio, which had an improving yield of 22.68% for 2016 (up from 22.57% the year prior). More than 53% of the portfolio has already been securitized (excluding the new 2017-1 series).
The Golden trust has the lowest loss rate of any Canadian issuer of credit card receivables-backed notes (2.2% over past two years), and has seen a decline in 30-day late pays.
But charge-offs crept up to 2.43% in 2016 compared to 2.08% in 2015.
The three-month average payment rates remained strong, according to presale reports, averaging about 49% over past two years. The payment rate since 2014 has been at or near 49%, after finishing 2013 averaging 45.83%.
Credit enhancement will consist of 6.5% subordination, an undetermined excess spread. Will also be supported by a reserve account that will initially be zero but will build up to 5% of the initial invested amount.
The average pool balance for the managed portfolio was CAN$11.2 million, as of year end, 9.4 million accounts, up from CAN$9.7 million the year prior.
Just over 70% of the accounts have a credit or zero balance; 8.03% have balances from CAN$0.01 to $500; the highest percentage of receivables (23.39%) come from the balance tier of CAN$5,000 to $10,000. Over 25% owe CAN$15,000 or more.