Fitch Rates Master Credit Card Trust II, Series 2016-3; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings to Master Credit Card Trust II, series 2016-3:

--USD1,000,000,000 class A asset-backed notes 'AAAsf'; Outlook Stable.

--CAD27,524,000 class B asset-backed notes 'AAsf'; Outlook Stable;

--CAD48,167,000 class C asset-backed notes 'BBBsf'; Outlook Stable.

KEY RATING DRIVERS

High Collateral Quality: The underlying collateral characteristics play a vital role in the performance of a credit card ABS transaction. Fitch closely examines such collateral characteristics as credit quality, seasoning, geographic concentration, delinquencies and utilization rate on the cards.

Strong Collateral Performance Metric: As of May 2016, Master Credit Card Trust II's (MCCT II) collateral performance metrics were in line with the Fitch indices. Charge-offs and 60+ day delinquencies have remained relatively stable over the past 24 months, and the monthly payment rate (MPR) has remained consistent since the inception of the trust. Gross yield has been robust over the past two years.

Adequate Credit Enhancement: The class A notes of series 2016-3 will benefit from 5.50% CE derived through the subordination of both class B and C notes and the cash collateral account. The class B notes will benefit from 3.5% CE derived through the subordination of class C notes and the cash collateral account. The class C notes' CE is based solely on the cash collateral account.

Quality Servicing Capabilities: Bank of Montreal (BMO) is an effective servicer, as evidenced by historical delinquency and loss performance of securitized receivables. Any deterioration that could occur in the credit quality of BMO may affect the performance of the collateral pool backing the notes.

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 monthly payment rate (MPR); and 3) a combination stress of higher defaults and lower MPR.

The harshest stress scenario of a combined 75% increase to defaults and a 35% reduction of MPR could lead to the most drastic downgrades to all classes. Under a moderate stress of a 50% increase in defaults and 25% reduction in MPR, rating migration could be less impacted. However, increasing defaults by 75% and reducing purchase rate by 100% alone in comparison will have the least impact on rating migration.

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 protected]'.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879815

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412

Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds - Derivative Addendum (pub. 14 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878499

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. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008846

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008846

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160713006523/en/

Fitch Ratings
Primary Analyst
John Alberici
Associate Director
+1-212-908-0370
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Stephanie Lobaccaro
Analyst
+1-212-908-0769
or
Committee Chairperson
Herman Poon
Senior Director
+1-212-908-0847
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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