NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the Long-term ratings and Outlooks assigned to American Express Issuance Trust II. A full 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. Fitch has maintained the Stable Outlook on the notes due to the strong trust performance and ability to generate robust excess spread.
Over the past 12 months, gross yield has been performing within Fitch's steady state expectations. As of the January 2016 reporting period, the 12-month average gross yield was 34.75% compared to the 12-month average of 34.43% from the prior year
Monthly payment rate (MPR), a measure of how quickly consumers are paying off their credit card balance, has been consistent over the past year. Currently, the 12-month average is 94.73%. AEIT II's MPR is well above the industry average due to the high concentration of prime borrowers and the nature of charge cards. The Fitch Prime Credit Card Index was 29.80% for the January 2016 reporting period.
Gross charge-offs have remained at low levels throughout the year. Currently, the 12-month average is 1.51%. 60+ day delinquency levels have also remained at very low levels with a 12-month average 60+ day delinquency rate of 0.49%. 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, MPR, gross charge-off, and purchase rates. 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.
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 this trust.
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 MPR, and 3) a combination stress of higher defaults and lower MPR.
Increasing defaults and reducing MPR alone have the least impact on rating migration even in the most severe scenario of a 75% increase in defaults. The harshest scenario assumes both stresses in increased chargeoffs and reduction to MPR to occur simultaneously. As such, the ratings would only be migrated downward under the severe stress of a 50% increase in defaults and 20% reduction in MPR.
To date, the transactions have exhibited strong performance with all performance metrics within Fitch's initial expectations. For further discussion of Fitch's sensitivity analysis, please see the new issue report related to one of the transactions listed above.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
American Express Issuance Trust II Series 2013-1:
--Class A at 'AAAsf'; Outlook Stable;
--Class B at 'A+sf'; Outlook Stable;
--Class C at 'BBBsf'; Outlook Stable.
American Express Issuance Trust II Series 2013-2:
--Class A at 'AAAsf'; Outlook Stable;
--Class B at 'A+sf'; Outlook Stable;
--Class C at 'BBBsf'; Outlook Stable.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868
Global Credit Card ABS Rating Criteria (pub. 26 Jun 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867482
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=999255
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999255
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.