The credit card asset class is adding to its tally as Trillium Credit Card Trust II 2024-1 prepares to sell $435 million in bonds to investors, secured by receivables that the Bank of Nova Scotia had originated.
Trillium will offer the notes to investors through rule 144A and Regulation S, according to Fitch Ratings analysts, who are rating a Trillium II transaction for the first time. Trillium's collateral is comprised mainly of prime-quality, Canadian credit-card receivables, according to Moody's Investors Service. The transaction will issue notes through three tranches and three classes of notes, all of which have a legal maturity date of Dec. 27, 2028.
Early talk on the notes have all of the notes pricing at par, with the class A notes pricing at 75 basis points over the three-month interpolated yield curve Secured Overnight Financing Rate (SOFR); the class B notes at 120 over the same 3-month I-Curve; and the C notes at 170 basis points over the class C notes against the 3-month, I-Curve, according to the Asset Securitization Report's deal database.
Scotia Capital, Citigroup Global Markets and J.P.Morgan Securities are lead underwriters on the deal, according to the ASR database.
Fitch Ratings intends to assign ratings of AAA, A and BBB to the classes A, B and C notes, according to the rating agency. Moody's also says it will rate the notes, assigning similar ratings of Aaa to the class A notes; A3 to the class B notes and Baa2 to the class C notes.
Moody's notes that the Trillium collateral has a high principal payment rate, 63.1%, for the eleven months ended November 2023. It also had payment rates of 66.7% and 59.0% for the twelve-month averages for 2022 and 2021, respectively. The rating agency also pointed out that credit lines are also low, with about 37.6% of the receivables balance come from accounts with CAD$10,000 ($7,395.30). Also, about 16.0% of the pool were derived from credit lines of $5,000 or less.
The transaction does have a number of credit challenges, however, Moody's pointed out. Bank of Nova Scotia could add receivables form additional accounts, and if any of those are of lower credit quality than the pool at closing, the average receivable credit quality will deteriorate, the company said. Further, the portfolio is relatively unseasoned, with about 31% of accounts by balance in the Trillium portfolio at five years old or less by the November 30 cutoff date. Only about 26% of accounts were more than 10 years old.
