BA Master Credit Card Trust’s $648.75 million class A floating-rate asset backed certificates, series 1998-B, are expected to be rated ‘AAA’ by Fitch IBCA. In addition, the corresponding $41.25 million class B floating-rate certificates are expected be rated ‘A’.
The certificates are backed by a pool of credit card receivables generated under Bank of America MasterCard and Visa accounts. Fitch IBCA’s expected ratings are based on the high quality of the collateral pool, available credit enhancement, Bank of America’s servicing expertise, and the sound legal and cash flow structures.
Credit enhancement totaling 13.5% of the initial invested amount will be available to class A certificateholders through subordination of class B, equal to 5.5% of the total invested amount, and the collateral interest. Class B’s 8.0% credit enhancement stems from subordination of the $60 million collateral interest (CIA). The CIA is a privately placed, uncertificated ownership interest in the trust subordinate in payment rights to classes A and B.
Several economic and credit stress scenarios were devised by Fitch IBCA to determine appropriate credit enhancement levels. The scenarios simultaneously stress yield, chargeoff, and monthly payment rate steady state assumptions. In addition, to address the interest rate risk associated with uncapped floating-rate coupons, the coupon is stressed to worst case London Interbank Offered Rate (LIBOR) levels without a 1:1 adjustment to yield.
Under the available enhancement, class A withstands a 35% decrease in yield, a 45% decline in payment rates and chargeoffs increasing to 30% and still makes full and timely payments of investor principal and interest. Class B sustains a 25% decrease in yield, a 35% decline in payment rates and chargeoffs increasing to more than 20% without suffering a principal or interest loss.
Early amortization events protect certificateholders from prolonged exposure to deterioration in portfolio performance and/or a transferor/servicer default. Occurrence of an amortization event will trigger a rapid payout of principal and investors may be repaid earlier or, in rare circumstances, later than expected.
Series 1998-B is structured with a revolving period, during which class A and class B investors receive monthly interest payments of one-month LIBOR plus 0.12% and 0.28%, respectively. During the revolving period, principal collections are used to purchase new receivables. Following the revolving period, investors continue receiving monthly interest payments as principal collections are accumulated for distribution in one payment on the expected maturity date. Bank of America may vary the accumulation period length, based on certain conditions, but must maintain it at least a minimum of one month. Principal and a final interest payment is expected to be distributed to class A investors in one payment on the May 2004 distribution date, followed by a single principal distribution to class B investors, expected in June 2004.Details