Royal Bank of Canada is pricing the first U.S. credit-card securitization of 2019 with a package of Canadian credit-card receivables.
Golden Gate Credit Card Trust (GCCT) 2019-1 will issue a single tranche of U.S.-dollar $550 million Class A notes package backed by payments on consumer and small-business Visa and Mastercard credit cards issued by RBC.
The senior notes in the two-year, floating-rate 2019-1 series will carry a coupon of 45 basis points over one-month Libor, according to a regulatory filing.
RBC’s previous U.S. dollar issuance, GCCT 2018-4, was a five-year fixed-rate (3.44%) issuance totaling $600 million. RBC has alternated between fixed- and floating-rate issues since 2016.
S&P notes in its presale report that the transaction is structurally similar to 2018-4 in terms of the eligible accounts and receivables in the pool, as well as early amortization events and default events.
RBC marketed four U.S.-dollar transactions in 2018 totaling $2.35 billion, as well as a $748 million deal that was issued in Canadian dollars (GCCT 2018-5). The trust currently has 14 series outstanding through its Golden trust.
The Class A notes being offering are backed by 6.5% credit support, and have preliminary triple-A ratings from S&P Global Ratings, DBRS and Fitch Ratings, according to presale reports.
The deal is expected to close Jan. 18. RBC Capital markets is underwriting the transaction.
The Class A notes will benefit from a cross-currency swap, in which the Golden trust will pay RBC a fixed interest rate in Canadian dollars and receive an equivalent U.S.-dollar interest rate equal to the monthly coupon on the Class A notes.
The series will also include a Class B and Class C series issue that will be retained by the trust.
S&P modeled the transaction on a 4% base-case loss rate, although DBRS reports the trust’s three-month average loss rate was only 2.2% as of Nov. 30 of last year. The rate has fluctuated between 2%-2.5% for two years – giving it the lowest loss rate of any Canadian issuer of receivables-backed notes.
The RBC credit-card portfolio has an average balance of $11.08 billion held in nearly 10.1 million accounts in 2018 (as of Sept. 30). Nearly 95% of the accounts are current (and a 60-plus day delinquency rate of 1.07%), producing an average yield of 22.68% and a monthly payment rate averaging 49.77% - a level in line with the three previous years, according to DBRS.
The deal is not only the first bank-card transaction of 2019, but the first since First National Bank of Omaha sold USD$300 million in bonds on Oct. 9.
