(The following was released by the rating agency) NEW YORK (Standard & Poor's) June 4, 2012--Standard & Poor's Ratings Services today assigned its preliminary 'AAA (sf)' rating to Discover Card Execution Note Trust's class A(2012-4) DiscoverSeries notes (see list).
The note issuance is an asset-backed securitization backed by undivided investor interest in Discover Card Master Trust I's series 2007-CC collateral certificate, which, in turn, is collateralized by receivables generated from designated Discover Card accounts.
The preliminary rating is based on information as of June 4, 2012. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.
The preliminary rating reflects our view of:
-- The 24.5% credit support provided by the subordinated class B, C, and D notes, which we believe is likely sufficient to withstand the simultaneous stresses we apply to our 5.5%-7.5% base-case loss rate, 16.5%-18.5% base-case payment rate, 15.0%-17.0% base-case yield, and 1.0%-3.0% purchase rate assumptions for the notes.
In addition, we used stressed excess spread and note interest rate assumptions to assess whether, in our opinion, sufficient credit support is available for the notes.
All of the stress assumptions outlined above are based on our current criteria and assumptions (for more information, see "General Methodology And Assumptions For Rating U.S. ABS Credit Card Securitizations," published April 19, 2010, and "Revised Purchase And Payment Rate Assumptions For U.S. Credit Card ABS," published Sept. 14, 2011).
-- Our view that the 7% minimum seller's interest is sufficient in our stress scenario to absorb dilutions, or noncash reductions, in the receivables.
-- Our expectation that under a moderate ('BBB') stress scenario, all else being equal, the preliminary 'AAA (sf)' rating on the class A(2012-4) notes will remain within one rating category of the assigned preliminary rating in the next 12 months, based on our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010).
-- The credit risk that is inherent in the collateral loan pool based on our economic forecast, the master trust portfolio's historical performance, the collateral characteristics, and vintage performance data.
-- Discover Bank's (Discover's) servicing experience; and our opinion of its account origination, underwriting, account management, collections, and general operational practices.
-- Our expectation of timely interest and ultimate principal payments by Nov. 15, 2019, the legal final maturity date, based on stressed cash flow modeling scenarios using assumptions that are commensurate with the assigned preliminary rating.
-- Our view of the notes' underlying payment structure, cash flow mechanics, and legal structure.