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UK's Tesco marketing first U.S. dollar-denominated credit card ABS

Tesco Personal Finance, a U.K. originator and servicer of domestic Visa and Mastercard accounts, is planning the first issue of U.S. dollar-denominated notes from its Delamare master securitization trust.

The size of the latest de-linked issuance of notes is to be determined, but the Delamare Cards MTN Issuer PLC Series 2018-1 A1 notes will be backed by credit-card receivables totaling more than £3.4 billion (US$4.45 billion).

S&P Global Ratings and Fitch Ratings have assigned preliminary triple-A ratings to the notes. The notes benefit from a minimum 11.5% credit enhancement and 2.5% in pre-funded cash reserves. The notes’ price is also to be determined and will be benchmarked to one-month U.S. dollar Libor.

The notes are being issued nearly a year after Tesco issued the first four rated classes of de-linked notes from its master trust. The existing notes in the trust total more than £2 billion (US $2.62 billion), through the triple-A rated 2017-1 series last October plus an unrated 2014-1 issuance.

The deal was arranged by Citigroup. BNP Paribas will provide the cross-currency swap services necessary for the transaction.

The transaction collateral features include bank-card accounts with average balances of £1,221.33, and a credit limit of £6,143.93. The accounts have an average seasoning of 46.4 months and a 30-day delinquency rate of 2.3%.

While Tesco originates the cards and is responsible for all aspects of servicing, marketing and processing, the bank accounts linked to the cards are held by HSBC and the London branch of Bank of New York Mellon, according to presale reports.

While Tesco has limited performance data, S&P states the transaction includes a stronger pool of receivables than comparable U.K. credit-card securitized pools. The agency assumes that the receivables will maintain a “relatively high” 30% payment rate (typically 20-26% in U.K. card issuer ABS), a yield-rate assumption of 7.5% and a charge-off base-case scenario of 5.5% that is considered lower than other comparable U.K. card pools, according to S&P.

Fitch is maintaining a 5% charge-off rate similar to the 2017-1 series.

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