NEW YORK--(BUSINESS WIRE)--Fitch Ratings has issued a presale for Discover Card Execution Note Trust, Class A (2014-2), and expects to rate the transaction as follows:
--$850 million class A (2014-2) 'AAAsf'; Outlook Stable.
Fitch's ratings are based on the underlying receivables pool, available credit enhancement, Discover Bank's underwriting and servicing capabilities, and the transaction's legal and cash flow structures, which employ early redemption triggers.
The transaction structure will be the same as Class A (2014-1), with credit enhancement totaling 24.50% for class A.
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 monthly payment rate (MPR), and 3) a combination stress of higher defaults and lower MPR.
Increasing defaults alone has little impact on rating migration even in the most severe scenario of a 75% increase in defaults. The rating sensitivity to a reduction in purchase rate is less pronounced with a severe stress, of a 100% reduction, leading to possible downgrades across all classes. The harshest scenario assumes that an increase in defaults and reduction in monthly payment rate occur simultaneously. Similarly, the ratings could be downgraded under the moderate stress of a 50% increase in defaults and 25% reduction in MPR; however, the severe stress could lead to more drastic downgrades to all classes.
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 related presale report. For a discussion of the representations, warranties, and enforcement mechanisms available to investors in this transaction please see the related presale appendix.
The presale report is available to all investors on Fitch's website at 'www.fitchratings.com'. For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance, and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at 'email@example.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Credit Card ABS Rating Criteria' (June 7, 2013);
--'Global Structured Finance Rating Criteria' (May 24, 2013).
Applicable Criteria and Related Research: Discover Card Execution Note Trust, Class A (2014-2), DiscoverSeries Notes (US ABS)
Global Credit Card ABS Rating Criteria
Global Structured Finance Rating Criteria