Fitch Affirms Discover Card Execution Note Trust

NEW YORK--()--Fitch Ratings has affirmed Discover Card Execution Note Trust's long-term ratings. The Rating Outlooks remains Stable. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmation is based on continued positive trust performance and robust breakeven multiples. The Rating Outlook for the subordinate notes remains Positive due to the strong trust performance, ability to generate robust excess spread, and breakeven multiples.

The current 12-month average gross yield for Discover Card Execution Note Trust is 18.19% as of the March 2015 distribution period.

Monthly payment rate (MPR), a measure of how quickly consumers are paying off their debt, has improved over the past year. Currently the 12-month average is 22.74%, up from 22.64% at the March 2014 distribution period.

Gross chargeoffs have declined since last review. Currently, the 12-month average is 2.79%, down from 3.02% at last year's review. As of the March 2015 reporting period, the 12-month average 60+ day delinquencies were 1.06% compared to the 12 -month average of 1.12% at this point last year. Fitch expects chargeoff levels to remain stable in the near term given the high quality of the credit card portfolio.

Fitch runs cash flow breakeven analysis by applying stress scenarios to three-, six-, and 12-month performance averages to evaluate the breakeven loss multiples at different rating levels. The performance variables that Fitch stresses are the gross yield, monthly payment rate, gross charge-off, and purchase rates. For further information, please review the U.S. Credit Card ABS Issuance updates published on a monthly basis.

The affirmations are based on the performance of the trusts in line with expectations. The Stable Outlook indicates that Fitch expects the ratings will remain stable for the next one to two years.

Fitch's analysis included a comparison of observed performance trends over the past few months to Fitch's base case expectations for each outstanding rating category. As part of its ongoing surveillance efforts, Fitch will continue to monitor the performance of these trusts.

RATING SENSITIVITIES

Fitch models three different scenarios when evaluating the rating sensitivity compared to expected performance for credit card asset-backed securities transactions: 1) increased defaults; 2) a reduction in purchase rate, and 3) a combination stress of higher defaults and lower MPR.

Decreasing purchase rate alone has the least impact on rating migration even in the most severe scenario of a 100% decrease in purchase rate. The rating sensitivity to an increase in defaults also does not have any rating migration. The harshest scenario assumes both stresses to defaults and MPR to occur simultaneously. The ratings would only be downgraded under the severe stress of a 75% increase in defaults and 35% reduction in MPR.

To date, the transactions have exhibited strong performance with all performance metrics within Fitch's initial expectations. For further discussion of our sensitivity analysis, please see the new issue report related to one of the transactions listed below.

Fitch has affirmed the following classes as indicated:

Discover Card Execution Note Trust:

--2007-1A at 'AAAsf'; Outlook Stable;

--2010-2A at 'AAAsf'; Outlook Stable;

--2010-B A at 'AAAsf'; Outlook Stable;

--2010-E A at 'AAAsf'; Outlook Stable;

--2011-B A at 'AAAsf'; Outlook Stable;

--2011-4A at 'AAAsf'; Outlook Stable;

--2012-3A at 'AAAsf'; Outlook Stable;

--2012-4A at 'AAAsf'; Outlook Stable;

--2012-5A at 'AAAsf'; Outlook Stable;

--2012-6A at 'AAAsf'; Outlook Stable;

--2012-B3 at 'AA-sf'; Outlook Positive;

--2013-1A at 'AAAsf'; Outlook Stable;

--2013-2A at 'AAAsf'; Outlook Stable;

--2013-3A at 'AAAsf'; Outlook Stable;

--2013-4A at 'AAAsf'; Outlook Stable;

--2013-5A at 'AAAsf'; Outlook Stable;

--2013-6A at 'AAAsf'; Outlook Stable;

--2014-A1 at 'AAAsf'; Outlook Stable;

--2014-A2 at 'AAAsf'; Outlook Stable;

--2014-A3 at 'AAAsf'; Outlook Stable;

--2014-A4 at 'AAAsf'; Outlook Stable;

--2014-A5 at 'AAAsf'; Outlook Stable;

--2015-A1 at 'AAAsf'; Outlook Stable;

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (August 2014);

--'Global Credit Card ABS Rating Criteria' (May 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Credit Card ABS Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748920

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981947

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Contacts

Fitch Ratings
Primary Analyst
Jenny Ovalle
Associate Director
+1-212-908-0849
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Harry Kohl
Associate Director
+1-212-908-0837
or
Committee Chairperson
Steven Stubbs
Senior Director
+1-212-908-0676
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Jenny Ovalle
Associate Director
+1-212-908-0849
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Harry Kohl
Associate Director
+1-212-908-0837
or
Committee Chairperson
Steven Stubbs
Senior Director
+1-212-908-0676
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com