Synchrony returns with $500M private-label card ABS issuance

Synchrony is launching its second de-linked retail credit card securitization of 2019 in a $500 million transaction from its master trust.

The SynchronySeries Class A notes from the Synchrony Card Issuance Trust (SYNIT) total $500 million, and benefit from 26% credit enhancement. The notes have preliminary triple-A ratings from Moody’s Investors Service and Fitch Ratings.

The notes are backed by receivables from private-label, dual-card originations from Synchrony for several retail partners, such as Sam’s Club, TJX, Lowe’s, Old Navy, Gap and JCPenney.

The notes have an expected maturity of three years.

This is the third series issuance from the SynchronySeries class, which is supported by principal receivables from accounts that totaled $4.05 billion as of April 30. The average account balance was $1,124 with an average limit of $6,295. The average utilization rate was 17.8%.

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The average seasoning was 62 months. Most of the accounts (82.12%) have a borrower FICO above 660.

The year-to-date average gross yield was 26.2%, and the YTD gross charge-off rate was 6.38%. The average monthly payment YTD is 20.22% of the account balance.

RBC, Wells Fargo and TD Securities are underwriters on the deal.

Although Synchrony sold its Walmart business to Capital One to end a legal disput earlier this year, it maintains Sam’s Club as a key retailer partner. Sam’s Club-branded cards account had $1.33 billion outstanding as of April 30, or 25.4% of the $5.3 billion Synchrony portfolio assigned to the SYNIT trust. Other major retailers in the mix include the Lowe’s private-label credit card business ($1.08 billion in balances among 1.08 million accounts), TJX ($703.6 million) and Old Navy ($537.5 million).

Moody’s said that while Synchrony is an experienced servicer (issuing securitizations since 1997, most notably its linked Synchrony Credit Card Master Note Trust), the agency had concerns of the light seasoning of retail card collateral assigned to the de-linked card trust established in November 2017. Only 52.1% of the trust’s receivables are from cardholder accounts more than four years of age, the agency stated, compared to 89% of the “Big Six” bank-card trusts.

Unseasoned accounts pose “incremental credit risk” since cardholders with shorter card payment histories “are more likely to default,” the agency report stated. Additionally, Synchrony is dependent on the market health of its retail partners – store closures could “reduce card utility” for cardholders who have fewer locations to patronize (and might prompt more defaults on existing balances for cards they are unable to further use).