$250 million of Asset-Backed Securities rated
New York, November 14, 2012 -- Moody's Investors Service has assigned a (P)A1 (sf) rating to the DiscoverSeries Class B(2012-3) notes issued by the Discover Card Execution Note Trust.
The complete rating action is as follows:
Issuer: Discover Card Execution Note Trust ("the Trust" or "DCENT")
$250,000,000 DiscoverSeries Class B(2012-3), rated (P)A1 (sf)
The rating is based on the quality of the underlying credit card receivables, the transaction's structural protections, the expertise of Discover Bank ("Discover") as servicer, and the credit enhancement from subordinate classes of notes in the series of which the notes are a part (the "DiscoverSeries").
The DiscoverSeries Class B(2012-3) notes have a floating rate coupon of 1-month LIBOR plus 0.[ ]% per year and an expected maturity date of November 16, 2015. The legal maturity date for these notes is May 15, 2018. Moody's rating addresses the likelihood of interest payments being made when due and the return of principal by the legal maturity date.
The assets of the Trust consist of the Discover Card Master Trust I ("Trust I"), Series 2007-CC collateral certificate, which represents an undivided interest in Trust I's credit card receivables that were originated, and serviced, by Discover. Discover is a wholly-owned subsidiary of Discover Financial Services. Discover's long-term bank deposit rating is Baa3, its bank financial strength rating is D+, and its short-term deposits and other short-term senior obligations are rated Prime-3.
Moody's expects performance in the range of 3.5% - 5.5% for charge-offs, 19% - 22% for yield and 19% - 22% for the principal payment rate.
Moody's performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities were rated. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.
The principal methodology used in this rating was "Moody's Approach To Rating Credit Card Receivables-Backed Securities", published in April 2007. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
The Volatility Score ("V Score") for this transaction is Medium, which is in line with the V score assigned for the U.S. Credit Card ABS sector. On December 19, 2008, Moody's published a report introducing V Scores and Parameter Sensitivities for the global credit card ABS sector. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. V Scores are intended to rank transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches).
Parameter Sensitivities provide a quantitative, model-indicated calculation of the number of notches that a Moody's-rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. It is not intended to measure how the rating of the security might migrate over time, but rather how the initial rating of the security might differ as certain key parameters vary.
In rating US Credit Card ABS, the payment rate, charge-off rate, purchase rate, yield and certain other inputs are used to calculate the median expected loss and the Aaa enhancement. These two, in turn, are the inputs used to determine a new lognormal loss distribution. Three new lognormal loss distributions were calculated for each rating class by assuming the following three payment and gross charge-off rate combinations: (1) 16%/9%, (2) 12%/14% and (3) 7%/19% from the base case of 21%/3.5%. The quantitative/model-indicated Parameter Sensitivities for the notes under these three additional scenarios are:
For the Class B Notes, three notches (i.e. A1 to Baa1), six notches and nine notches, respectively.
Additional research, including a pre-sale report, is available at www.moodys.com. A special report entitled "V Scores and Parameter Sensitivities in the Global Credit Card ABS Sector" is also available on moodys.com.
The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
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Giyora Eiger Vice President - Senior Analyst Structured Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Luisa De Gaetano VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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