Synchrony Card Issuance Trust is preparing to issue $500 million in securitization bonds, secured by de-linked credit card receivables.
The single-tranche transaction, called SYNIT, 2024-2, will sell notes to investors through just one triple-A tranche, according to ratings analysts at Moody's Ratings and Fitch Ratings. Synchrony Bank, a federal savings bank owned by Synchrony Financial, is sponsoring the deal. Its experience as a servicer and its commitment to Synchrony Credit Card Master Note Trust, or SYNCT, help boost credit strengths in the portfolio, according to Moody's.
Other strong credit traits include a low average account balance of $1,570 as of the deal's May 31, 2024 cutoff date. That is lower compared to the Big Six bank credit card issuers, Moody's analysts said.
Yet there are a couple of potential credit challenges. For one, the trust portfolio has just a brief performance track record, which limits the usefulness of comparisons to other credit card issuers, Moody's said. It's also a relatively unseasoned portfolio, where only 85% of the trust's receivables belong to cardholder accounts that are at least four years old as of May 31, 2024. That falls short of the entire SYNCT's portfolio being at least four years old and each of the Big Six bank card trusts.
Fitch, meanwhile, noted that elevated interest rates, persistent inflation and slowing wage growth has continued to impact consumers and degrade performance according to primary metrics. As of the May 2024 collection period, gross chargeoffs were 5.57%, up from 4.74% one year ago, and above the pre-pandemic's 4.65% for the February 2020 collection period, the rating agency said.
J.P.Morgan Securities, RBC Capital Markets and TD Securities are underwriters on the deal, analysts said.
Although the deal will sell just one tranche of notes to investors, those notes benefit from 26.0% in subordination, which comes from a subordinated transferor amount deficit, Fitch said.
Fitch assigns AAA to the A tranche, while Moody's gives the notes Aaa.
