Synchrony Financial’s latest private-label credit card receivables securitization is matching note-for-note the structure of its previous transaction.
Synchrony Credit Card Master Note Trust Series 2016-2 is a $650.6 million notes package backed by a pool of branded credit card receivables and led by $500 million in triple-A rated Class A notes atop the capital stack. Those notes, along with a $47.95 million in Class B notes, are being publicly issued with 27% and 20% credit enhancement features, respectively.
If those features sound familiar, that’s because that’s also how Synchrony structured its first 2016 issuance in March: besides the identical sums of the A and B notes, 2016-2 also compares to 2016-1 to the dollar for the Class C ($41.1 million) and Class D notes ($61.6 million) that will not be publicly sold.
The Class B notes carry an early ‘AA’ structured finance rating from Fitch and an ‘AA+’ by Standard & Poor’s, as both agencies released presale reports on the deal Friday.
The Class C notes are rated ‘A’ by Fitch and ‘AA-’ by S&P; the Class D notes are only rated by S&P, which has placed a preliminary ‘BBB’ rating on them.
Synchrony, formerly known as GE Capital Retail Bank and GE Money Bank, has also left unchanged much of the structure it put into place for its prior 2015-4 securitization, which although smaller sized at $275 million is similar to 2016-1 and 2016-2 in terms of issuing entity, eligible accounts and receivables, payment priority, early redemption events and events of default, according to S&P’s presale report.
The familiarity between deals has been bred through the bank’s continuous use of collateralized pools since 2004 to securitize receivables of the cards that Synchrony Bank (and previously GE Capital) issues and serviced for private-label retailers like JCPenney, Lowe’s and Sam’s Club. Synchrony now has 23 outstanding issues through its Master Note Trust Series that now has approximately $13.9 billion in its portfolio of consumer accounts.
In 2016-2, the collateral pool of loans carries the characteristics of previous securitized deals, with a heavy concentration of cards from major retail clients such as JCPenney (20.4%), Lowe’s (18.4%), Wal-Mart (13.8%) and Sam’s Club (11.9% for its dual card, 10.1% for its regular Sam’s Club issue).
The cardholders in Synchrony’s pools are lesser-risk borrowers, with more than 75% carrying FICO scores of greater than 660 (35% alone have scores above 720, according to S&P). The average account carries a balance of $725 and has a credit limit of $3,665. More than 40% of customers make payments greater than the minimum payment level, and 35.16% pay off balances in full each month. Nine-day delinquencies have been falling, and now stand at 1.54% compared to 1.72% two years ago.
Charge-offs, at 6.36%, are below the Fitch Retail Credit Card Chargeoff Index industry average of 6.47%.
The credit enhancements on the note classes are supplied by the subordination, as well as a $34.25 million excess collateral amount account.
JPMorgan and Mitsubishi UFJ Securities are the underwriters on the deal.