RBC Dominion Securities Inc. Altaf Nanji, CFA (Analyst) (416) 842-6462 altaf.nanji@rbccm.com Edward Martinez (Associate) (416) 842-5165 edward.martinez@rbccm.com Program Ranking Algonquin CCT OP Broadway CCT SP Canadian CCT SP CARDS II SP Eagle CCT SP Glacier CCT SP Gloucester CCT OP Golden CCT SP Master CCT SP Credit Card ABS Monitor Has underwriting deteriorated? Summary We explore the question of why subordination levels for Schedule 1 bank programs are under pressure. • As we mentioned last month, with Schedule 1 bank programs registering loss rates that exceed the historical range of 2.75%-3.75%, enhancement levels look thin, in our view. Since then, Cards II entered into an agreement with CIBC to provide a new series of “Enhancement Notes” to support its credit card ABS transactions (an increase in subordination of 2.25% across the board – see our note dated July 23, “Cards II Trust – Boosting Enhancement Levels”). • Given that current loss rates are outside of the historical range of performance, a key consideration is the nature of the performance deterioration. Our examination of changes in certain pool characteristics dating back to 2005 shows that Schedule 1 bank credit card programs have demonstrated an increased propensity to assume risk. This suggests deteriorating performance metrics are due to structural, in addition to cyclical, considerations. Relative value looks very appealing • Credit card ABS spreads have tightened since our last review; however, they have underperformed deposit notes and, as such, the basis has widened. Senior tranches of Schedule 1 bank card ABS now trade ~60bps back of similarly dated (~3-year) deposit notes and non-bank sponsored paper continues to trade ~3.5x wider than bank deals (Exhibit 4). Considering (1) the wide relative spread levels, (2) the quality of the underlying assets and sponsors (two sponsors have already supported their programs this year) and (3) the “plain vanilla” nature of the structures, we continue to like the risk-reward trade-off offered by these securities. • Within the card space, we continue to recommend deals from Algonquin Credit Card Trust and Gloucester Credit Card Trust. August 05, 2009 All values in Canadian dollars unless otherwise noted. Priced as of market close ET, August 04, 2009 unless otherwise noted. For Required Conflicts Disclosures, please see page 30. Performance continues to be weighed down by macro factors • Unemployment still rising. The Canadian unemployment rate hit 8.6% in June, up 20bps over the May reading. With the employment picture projected to get worse before it gets better, pressures on card portfolios are expected to remain elevated in the near term. • Losses for the month of June were up for five of the nine programs we follow. For the year, average losses are up across the board, with increases ranging from a low of 100bps to a high of 330bps. • Loss mitigation strategies should temper loss severities going forward. Looking ahead, it is important to note that the program sponsors have ramped up loss mitigation strategies. This should reduce loss severities. • Delinquency rates improving. 30-day delinquency rates have been showing signs of stabilization for the non-Schedule 1 bank deals since the start of the year. • Payment rates are stabilizing. Payment rates in June were up for all of the deals we track, which is encouraging, and which could be partly attributed to redoubled collection efforts. However, we note that this metric can reflect a degree of seasonality given the impact of tax refunds. • Yields were up in June...likely due to higher revolving balances offsetting the closer management of outstanding balances and lower purchase volumes. On average, yields for most programs remain elevated as declining payment rates result in higher carrying balances. ABS Monitor August 05, 2009 Table of Contents Why Are Schedule 1 Bank Subordination Levels Under Pressure?........................................... 3 Banks have demonstrated an increased appetite for risk................................................................... 3 Relative Value ................................................................................................................................. 5 Credit card ABS looking very appealing .......................................................................................... 5 Performance Commentary............................................................................................................. 7 Navigating the challenging macro backdrop..................................................................................... 7 Appendix.......................................................................................................................................... 9 Canadian Credit Card Trust (National Bank of Canada) ................................................................ 11 CARDS II Trust (CIBC) ................................................................................................................. 13 Golden Credit Card Trust (Royal Bank of Canada)........................................................................ 15 Master Credit Card Trust (Bank of Montreal) ................................................................................ 17 Algonquin Credit Card Trust (Capital One).................................................................................... 19 Broadway Credit Card Trust (Citibank).......................................................................................... 21 Eagle Credit Card Trust (PC Bank) ................................................................................................ 23 Glacier Credit Card Trust (Canadian Tire Bank) ............................................................................ 25 Gloucester Credit Card Trust (B of A / MBNA)............................................................................. 27 Global Credit Research Team ..................................................................................................... 29 Required Disclosures .................................................................................................................... 30 Disclaimer....................................................................................................................................... 31 2 Altaf Nanji, CFA August 05, 2009 ABS Monitor Why Are Schedule 1 Bank Subordination Levels Under Pressure? Banks have demonstrated an increased appetite for risk Given that current loss rates are outside the historical range of performance, a key consideration is the nature of the performance deterioration. A structural change in the characteristics of the pool could necessitate supplemental enhancement or a negative credit rating action. • As we mentioned last month, with Schedule 1 bank programs registering loss rates that exceed the historical range of 2.75%-3.75%, enhancement levels look thin, in our view. Since then, Cards II entered into an agreement with CIBC to provide a new series of “Enhancement Notes” to support its credit card ABS transactions (an increase in subordination of 2.25% across the board – see our note dated July 23, “Cards II Trust – Boosting Enhancement Levels”). • In our view, if the elevated loss rates are determined to be largely a function of the severity of the economic downturn, current subordination levels may prove sufficient. However, if the deterioration is judged to be more structural in nature (i.e., if the credit characteristics of the underlying pools have eroded as the propensity to assume risk has increased), supplemental enhancement (or negative credit rating action) could be required. Our examination of changes in certain pool characteristics dating back to 2005 shows that Schedule 1 bank credit card programs have demonstrated an increased propensity to assume risk. This suggests deteriorating performance metrics are due to structural, in addition to cyclical, considerations. • By segmenting each pool’s portfolio stratification of account balances and credit limits into tertiles, we determined that the Schedule 1 banks have been relatively more aggressive in growing their books of business over the last 3+ years, which is reflected in increased credit limits and higher account balances. • As demonstrated in Exhibit 1, accounts with balances in the top-third of the portfolio stratification have increased 19%, 15% and 14% for Cards II, Golden and Master, respectively. In dollar terms, the growth in accounts with balances of $10K+ has averaged 15.5% for these three Schedule 1 bank programs. In contrast, accounts with balances in the top-third of the portfolio stratification for the non-Schedule 1 programs have averaged 8.7%, with Algonquin actually registering a decline. Exhibit 1: Growth in top-tertile account balances of Schedule 1 bank pools exceeds that of non-Schedule 1 banks 70% 90% +14% +9% 80% 60% 70% +12% 50% 60% % of Pool % of Pool +19% 40% +15% 30% 50% +9% 40% +14% 30% 20% 20% 10% -1% 10% 0% 0% CARDS II Bottom-third ('05 vs. '09) Golden Mid-third ('05 vs. '09) Master Top-third ('05 vs. '09) Algonquin Broadw ay Eagle* Bottom-third ('05 vs. '08) Mid-third ('05 vs. '08) Glacier Gloucester Top-third ('05 vs. '08) Source: RBC CAPITAL MARKETS, Trust Reports; * Eagle CCT data represents ’06 vs. ’08. • Looking at the shifts in the portfolio composition by authorized credit limit tells a similar story. As can be seen in Exhibit 2, Schedule 1 bank programs have seen top-third credit limits grow by an average of 16.5% (+22%, +18% and +10% for Cards II, Golden and Master, respectively). In contrast, credit limits for non-Schedule 1 programs have increased an average of 12.5%, with Algonquin and Eagle registering very low levels of growth (-1% and +7%, respectively). Altaf Nanji, CFA 3 ABS Monitor August 05, 2009 Exhibit 2: Growth in top-tertile account balances of Schedule 1 bank pools exceeds that of non-Schedule 1 banks 100% 80% +17% +10% 90% 70% 80% +22% 60% % of Pool 70% +19% +18% 60% 50% 50% 40% 40% +21% +7% 30% 30% 20% -1% 20% 10% 10% 0% 0% CARDS II Golden Bottom-third ('05 vs. '09) Master Mid-third ('05 vs. '09) Algonquin Broadw ay Bottom-third ('05 vs. '08) Top-third ('05 vs. '09) Eagle* Glacier Mid-third ('05 vs. '08) Gloucester Top-third ('05 vs. '08) Source: RBC CAPITAL MARKETS, Trust Reports; * Eagle CCT data represents ’06 vs. ’08 • The bottom line is that with subordination levels geared to underlying portfolios that were more conservative in their composition, the Schedule 1 bank pools may have undergone a structural shift in risk appetite that could necessitate supplemental support. Although Cards II appears to be the worst offender, with loss rates pushing subordination levels for Master, Canadian and Golden (Exhibit 3), a course of action similar to that taken for Cards II is not out of the realm of possibilities. • Further, investors should keep in mind that Moody’s is of the view that if losses were to continue to rise at a rapid pace (not out of the realm of possibilities given the outlook for unemployment), any meaningful drop in yields or payment rates could put pressure on ratings, especially for the lower-rated subordinate tranches. Exhibit 3: Loss rates for Schedule 1 bank deals are approaching subordination levels…excess spread remains robust 30% 30% Outperform 25.3% 25% 25% 21.7% 20.3% 17.0% 20% 15.9% 15.1% 15% 9.6% 10% Enhancement Enhancement 20% 19.9% 18.9% 15% 10% 10.8% 8.5% 8.5% 5% 6.9% 4.0% 4.4% Golden Master 5% 6.2% 5.7% 0% 6.0% 0% Subordination XS Spread CARDS Loss Rate CCCT Total Source: RBC CAPITAL MARKETS, Trust Reports. Data as at 30-May-09. 4 Altaf Nanji, CFA Algonquin Broadw ay Subordination Eagle XS Spread Gloucester Loss Rate Glacier Total August 05, 2009 ABS Monitor Relative Value Credit card ABS looking very appealing Credit card ABS spreads have tightened since our last review; however they have underperformed deposit notes and, as such, the basis has widened. Senior tranches of Schedule 1 bank card ABS now trade ~60bps back of similarly dated (~3-year) deposit notes and non-bank sponsored paper continues to trade ~3.5x wider than bank deals (Exhibit 4). Considering (1) the wide relative spread levels, (2) the quality of the underlying assets and sponsors (two sponsors have already supported their programs this year) and (3) the “plain vanilla” nature of the structures, we continue to like the risk-reward trade-off offered by these securities. • Since the last Credit Card ABS Monitor, deposit notes in the area of 3-years to maturity have tightened approximately 40bps. Over that time frame, Schedule 1 bank ABS tightened approximately 15bps. The basis, which previously stood at ~35bps, has now widened to approximately 60bps. • The relative value story is even more compelling when viewed versus bank sub-debt, as Schedule 1 bank card paper now trades 0-10bps back. Exhibit 4: Schedule 1 bank deals trade 25-40bps back of deposit notes – non-bank deals trade much wider 600 BCCT 5.449% 6/17/2013 500 ALGONQ 4.562% 6/15/2012 bps 400 GCC 5.421% 4/15/2013 300 200 100 MCCT 5.297% 8/21/2012 0 May/07 Aug/07 Nov/07 Feb/08 May/08 Aug/08 Nov/08 Feb/09 May/09 Avg. Deposit Note Source: RBC CAPITAL MARKETS, ADI Within the card space, we continue to recommend deals from Algonquin Credit Card Trust and Gloucester Credit Card Trust. • As per our rich/cheap analysis (Exhibit 5) introduced last month, Schedule 1 bank deals still trade tight to the peer group but offer a low credit enhancement ratio. In contrast, deals from Algonquin and Gloucester trade wide and offer a high credit enhancement ratio. While there are several factors at play contributing to a spread basis, in our view a 300bp+ differential (in some cases) seems inconsistent with the underlying credit realities. Altaf Nanji, CFA 5 ABS Monitor August 05, 2009 GCCT 06-1 (Mar-11) GCCT 04-1 (May-14) MSTCCT 06-1 (Nov-09) MSTCCT 06-2 (Nov-11) MSTCCT 08-2 (Aug-12) Average Spread MSTCCT 08-1 (May-13) ALGONQ 05-1 (Oct-10) ALGONQ 07-1 (Jun-12) ALGONQ 06-1 (Jul-11) GCCT 08-1 (May-13) Good Value CCCT 05-1 (Apr-10) CCCT 08-1 (Mar-13) GLCRTC 05-1 (Nov-10) GLCRTC 06-1 (Nov-11) Expensive CCCT 05-2 (Apr-12) GLCRTC 06-2 (May-14) GLCRTC 04-1 (Nov-09) GOLCCT 05-1 (Jun-10) EAGCCT 06-1 (Mar-11) GOLCCT 06-1 (Feb-11) 100 GOLCCT 08-2 (Apr-13) 200 CARDS 05-4 (Oct-10) CARDS 04-1 (Oct-09) Spread (bps) 300 GLCRTC 08-1 (Feb-13) Fair Value 400 GOLCCT 08-1 (Apr-11) 500 Average Enhancement Ratio BCCTR 04-2 (Mar-14) 600 BCCTR 08-1 (Jun-11) BCCTR 08-2 (Jun-13) Exhibit 5: The ratio of enhancement to loss rates suggest non-Schedule 1 bank deals offer good value Fair Value 4.43 4.32 4.10 3.55 3.43 2.96 2.71 2.59 2.57 2.52 2.29 2.20 1.69 1.42 1.00 0 Enhanc ement / Loss Rate (x) Interpreting the chart: To present credit enhancement levels in context of the credit quality of the underlying pool, we display the total enhancement (i.e., subordination and excess spread) as a multiple of the pool’s loss rate (the “credit enhancement ratio”). Accordingly, deals in the lower left quadrant of the chart could be characterized as expensive (as they offer a low enhancement ratio but trade tight) whereas deals in the upper right quadrant look to offer value (a high enhancement ratio and wide trading levels). Source: RBC Capital Markets 6 Altaf Nanji, CFA August 05, 2009 ABS Monitor Performance Commentary Navigating the challenging macro backdrop The Canadian unemployment rate ticked up 20bps in June to 8.6%, providing another reminder that pressures on card portfolios are likely to continue in the near-to-medium term. • The outlook for pool performance remains soggy given the weak prospects for the economy. RBC Economics continues to forecast Canadian unemployment peaking at a rate of 9.2% in Q4/09 and Q1/10, then falling to 8.8% in Q4/10. • Since bottoming at 5.8% in November 2007, the unemployment rate has increased by 280bps and the average loss rate on the Canadian credit card pools has increased 230bps. Given the tight relationship, another 60bp increase in the unemployment rate could translate into a commensurate increase in pool loss rates. Looking ahead, while increasing levels of unemployment should pressure loss rates further, it is important to note that the program sponsors have ramped up loss mitigation strategies. This should reduce loss severities. • Program sponsors have amplified their loss mitigation strategies as the economic backdrop has soured. Efforts include cancelling inactive cards (which carry the risk of only being used when a cardholder is in financial difficulty), cutting spending limits (for customers with faulty payment histories), employing tighter underwriting standards for new accounts and maintaining a heightened sensitivity to collections management. • We think the efforts outlined above should, in turn, mitigate the rate of increase in losses as the employment situation deteriorates. Credit deterioration looks set to continue Losses for the month of June were up for five of the nine programs we follow. For the year, average losses are up across the board, with increases ranging from a low of 100bps to a high of 330bps. • For the month of June, losses were up for all programs except Broadway, Cards II, Eagle and Golden (see Deal Summaries for individual program performance detail). • Average losses for all deals are up approximately 1.7% over year-end 2008 average losses. At current levels, YTD 2009 average losses represent multi-year highs (Exhibit 6). Exhibit 6: YTD 2009 average losses at multi-year highs 1999 2000 2001 2002 2003 2004 CapOne - Algonquin - - - - - - Citi - Broadway - - - - - PC Bank - Eagle - - M BNA - Gloucester - CanTire - Glacier 3.2% 6.0% 3.6% 2005 2006 2007 2008 4.9% 4.5% 4.5% 4.8% 6.8% 5.4% 4.8% 4.9% 6.7% 10.0% 3.5% - - - Y TD '09 3.1% 3.2% 4.1% 6.6% 3.9% 4.2% 4.4% 4.7% 4.4% 4.4% 4.0% 5.1% 7.5% 5.8% 4.7% 5.1% 5.8% 5.6% 6.1% 6.1% 5.7% 6.5% RBC - Golden - 1.3% 1.7% 1.7% 1.7% 1.6% 2.0% 2.3% 2.3% 2.5% 3.6% BM O - M aster - 1.9% 2.4% 2.2% 2.2% 2.1% 2.0% 1.9% 2.2% 2.6% 3.7% 3.1% 3.3% 3.5% 3.6% 3.6% 3.4% 3.3% 3.7% 6.1% 2.9% 3.3% 3.3% 3.5% 3.7% 3.7% 4.2% 5.3% CIBC - CARDS - - National - CCCT - - - Source: RBC Capital Markets, Trust Reports, DBRS • 30-day delinquency rates have been showing signs of stabilization for the non-Schedule 1 bank deals since the start of the year (Exhibit 7), despite a blip for Algonquin. However, the trend for Schedule 1 bank deals was mixed, with CCCT and Golden reporting increases in delinquencies. With the macro environment souring and with unemployment spiking, the improved delinquency trends are likely a result of seasonality and a heightened sensitivity to receivables management, collections and underwriting. Altaf Nanji, CFA 7 ABS Monitor August 05, 2009 Exhibit 7: 30-day delinquency rates Signs of stabilization in non-Schedule 1 deals, while Golden & CCCT disappoint 1.4% 2.8% 2.3% 1.2% 1.8% 1.0% 1.3% 0.8% 0.8% Jan-09 Feb-09 Mar-09 CCCT Apr-09 Cards I I May-09 Golden Jun-09 Jan-09 Master Feb-09 Algonquin Mar-09 Broadway Apr-09 Eagle May-09 Glacier Jun-09 Gloucester Source: RBC Capital Markets, Trust Reports Payment rates in June were up for all the deals we track, which is encouraging, and which could be partly attributed to redoubled collection efforts. However, we note that this metric can reflect a degree of seasonality given the impact of tax refunds. • In contrast to the May data (which were a real mixed bag), payment rates were up across the board in June. While the June performance is encouraging, we note that seasonality may be a key underlying driver of the sequential improvement. • Looking at averages for the year, we note that payment rates are down for all deals with Master CCT down the most, at -3.9% (though still a 50bp sequential improvement). That said, Master CCT continues to report the fourth-highest payment rates of the group (Exhibit 8). Exhibit 8: Average payment rates still low 1999 2000 2001 2002 2003 2004 2005 CapOne - Algonquin - - - - - - - 2006 2007 2008 9.0% 9.8% 9.8% Citi - Broadway - - - - - 14.6% PC Bank - Eagle - - - - - M BNA - Gloucester - 12.8% 12.9% 13.7% 13.1% CanTire - Glacier 22.3% 21.2% 23.1% 21.5% 22.6% RBC - Golden 46.1% 42.4% 39.0% 38.9% BM O - M aster - 37.9% 38.7% 39.2% CIBC - CARDS 40.0% 39.1% 39.4% National - CCCT 29.9% 30.3% 27.5% Y TD '09 9.2% 15.8% 17.5% 16.9% 17.0% 15.4% - - 43.8% 42.9% 42.9% 42.0% 13.9% 14.7% 15.0% 15.1% 14.2% 12.6% 23.4% 23.5% 27.8% 25.0% 25.8% 24.6% 38.4% 38.7% 39.4% 36.7% 37.2% 37.5% 35.5% 39.2% 40.6% 41.9% 41.6% 41.6% 39.1% 35.2% 42.0% 41.5% 43.0% 43.7% 42.7% 41.5% 39.4% 36.2% 26.2% 27.4% 26.5% 24.8% 24.2% 24.9% 28.9% 28.3% Source: RBC Capital Markets, Trust Reports, DBRS Yields were up for every deal bar Eagle CCT in June. On average, yields for most programs remain elevated as declining payment rates result in higher carrying balances (Exhibit 9). • Schedule 1 bank programs all registered higher yields in June, on average up 14bps for the group (standout: Cards II +24bps) over May, while non-bank deals, on average, saw yields rise 7bps sequentially (standout: Broadway +20bps). • 8 Altaf Nanji, CFA Increasing yields against a backdrop of higher payment rates, while somewhat of an anomaly, will occur from time to time as revolving balances continue to grow in the current environment. August 05, 2009 ABS Monitor Exhibit 9: Yields generally increase as payment rates decline 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Y TD '09 CapOne - Algonquin - - - - - - 19.0% 19.4% 20.1% 20.6% 20.2% Citi - Broadway - - - - - 17.3% 17.5% 17.8% 17.8% 19.6% 20.6% PC Bank - Eagle - - - - - - - 17.7% 18.4% 20.6% 22.9% M BNA - Gloucester - 14.8% 15.7% 15.1% 17.6% 19.2% 20.3% 22.3% 19.7% 18.2% 17.2% CanTire - Glacier 22.3% 20.6% 20.8% 17.6% 17.5% 16.8% 16.6% 18.6% 18.5% 19.9% 20.6% 13.6% RBC - Golden - 14.2% 13.6% 13.3% 13.2% 12.9% 13.1% 13.7% 13.6% 13.4% BM O - M aster - 15.2% 15.6% 16.8% 18.8% 18.8% 19.5% 20.4% 21.3% 21.5% 21.9% CIBC - CARDS - - 16.7% 16.8% 16.9% 17.4% 17.1% 17.0% 17.1% 17.2% 17.8% National - CCCT - 19.2% 19.5% 19.3% 18.9% 18.9% 18.5% 18.6% 19.2% 19.7% 20.6% Source: RBC Capital Markets, Trust Reports, DBRS Altaf Nanji, CFA 9 ABS Monitor August 05, 2009 Appendix 10 Altaf Nanji, CFA August 05, 2009 ABS Monitor Canadian Credit Card Trust (National Bank of Canada) Exhibit 10: Deal Summary Total Series Class 2005-1 A Amount Coupon 425,250,000 4.143 Maturity Subordination 26-Apr-10 Excess Spread Enhancement 5.50% 10.17% 15.67% B 12,375,000 4.463 26-Apr-10 2.75% 10.17% 12.92% C 12,375,000 4.813 26-Apr-10 0.00% 10.17% 10.17% Amount Coupon 330,750,000 4.513 Total Series Class 2005-2 A Maturity Subordination 24-Apr-12 Excess Spread Enhancement 5.50% 9.79% 15.29% B 9,625,000 4.863 24-Apr-12 2.75% 9.79% 12.54% C 9,625,000 5.263 24-Apr-12 0.00% 9.79% 9.79% Amount Coupon 400,000,000 5.365 Total Series Class 2008-1 A Maturity Subordination 25-M ar-13 Excess Spread Enhancement 5.50% 8.88% 14.38% B 11,641,000 6.365 25-M ar-13 2.75% 8.88% 11.63% C 11,641,000 7.914 25-M ar-13 0.00% 8.88% 8.88% Excess Spread 2005-2 10.73% 10.99% 10.93% 11.14% 10.73% 10.56% 9.96% 10.33% 10.11% 10.09% 9.58% 9.79% 2008-1 9.15% 10.07% 10.01% 10.22% 9.81% 9.65% 9.04% 9.41% 9.19% 9.18% 8.66% 8.88% Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 11: 12-Month Pool Performance M onth 1-Jul-08 1-Aug-08 1-Sep-08 1-Oct-08 1-Nov -08 1-Dec-08 1-Jan-09 1-Feb-09 1-M ar-09 1-Apr-09 1-M ay-09 1-Jun-09 Yield Payment Rate 19.98% 32.88% 19.37% 27.21% 20.43% 30.99% 19.48% 31.21% 20.54% 26.38% 19.25% 31.17% 19.81% 28.79% 21.99% 28.36% 19.47% 27.81% 20.59% 27.14% 20.20% 28.56% 21.61% 29.29% Loss Rate 3.81% 3.90% 3.74% 4.69% 5.13% 4.82% 4.07% 6.10% 5.09% 5.79% 5.22% 5.70% 30-59 0.86% 0.89% 0.94% 0.92% 1.03% 1.03% 1.19% 1.14% 1.15% 1.10% 1.08% 1.15% Delinquencies 60-89 0.40% 0.41% 0.43% 0.42% 0.49% 0.49% 0.58% 0.58% 0.53% 0.47% 0.52% 0.52% 90+ 0.66% 0.67% 0.70% 0.71% 0.72% 0.74% 0.84% 0.85% 0.86% 0.84% 0.83% 0.82% 2005-1 11.10% 11.37% 11.30% 11.51% 11.10% 10.94% 10.34% 10.70% 10.48% 10.47% 9.95% 10.17% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 11 ABS Monitor August 05, 2009 Exhibit 12: Canadian CCT Performance Trends Y ield Pay me nt Rate 22% 32% 21% % % 20% 30% 28% 26% 19% Apr-08 Jul-08 Oct-08 Jan-09 Apr-08 Apr-09 Jul-08 Oct-08 Jan-09 Apr-09 Delinque nc ie s Lo ss Rate 7% 1.3% 1.1% 6% % % 0.9% 0.7% 5% 0.5% 4% 0.3% Apr-08 3% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-08 Oct-08 30-59 Jan-09 60-89 Apr-09 90+ Source: RBC Capital Markets Research Sector Perform We rank Canadian CCT at Sector Perform as positive attributes (i.e., healthy yields that are among the highest in the peer group and payment rates that remain strong and have demonstrated stability) are offset by the fact that loss rates are approaching senior-tranche subordination levels and spreads trade well through non-Schedule 1 bank programs. 12 Altaf Nanji, CFA August 05, 2009 ABS Monitor Cards II Trust (CIBC) Exhibit 13: Deal Summary Total Series Class 2004-1 A Amount Coupon 600,000,000 4.379 Maturity Subordination 15-Oct-09 5.00% Excess Spread Enhancement 2.62% 7.62% B 12,631,579 4.699 15-Oct-09 3.00% 2.62% 5.62% C 18,947,369 4.699 15-Oct-09 0.00% 2.62% 2.62% Amount Coupon Total Maturity Subordination Excess Spread Enhancement Series Class 2004-3 A 500,000,000 Floating 15-Oct-09 8.00% 6.23% 14.23% B 21,739,131 Floating 15-Oct-09 4.00% 6.23% 10.23% C 21,739,131 Floating 15-Oct-09 0.00% 6.23% 6.23% Amount Coupon Total Series Class Maturity Subordination Excess Spread Enhancement 2005-1 A 500,000,000 Floating 22-M ar-10 10.25% 8.39% B 21,739,131 Floating 22-M ar-10 6.25% 8.39% 14.64% C 21,739,131 Floating 22-M ar-10 2.25% 8.39% 10.64% 18.64% Total Maturity Subordination Excess Spread Enhancement Series Class Amount Coupon 2005-2 A 400,000,000 Floating 20-Sep-12 10.25% 8.39% B 17,391,305 Floating 20-Sep-12 6.25% 8.39% 14.64% C 17,391,305 Floating 20-Sep-12 2.25% 8.39% 10.64% 18.64% Total Maturity Subordination Excess Spread Enhancement Series Class Amount Coupon 2005-3 A 200,000,000 Floating 23-Sep-10 10.25% 8.41% B 8,695,653 Floating 23-Sep-10 6.25% 8.41% 14.66% C 8,695,653 Floating 23-Sep-10 2.25% 8.41% 10.66% 18.66% Total Maturity Subordination Excess Spread Enhancement Series Class Amount Coupon 2005-4 A 750,500,000 3.89% 15-Oct-10 7.25% 5.17% 12.42% B 15,800,000 4.06% 15-Oct-10 5.25% 5.17% 10.42% C 23,700,000 4.31% 15-Oct-10 2.25% 5.17% 7.42% Amount Coupon Total Maturity Subordination Excess Spread Enhancement Series Class 2006-1 A 250,000,000 Floating 20-M ar-13 10.25% 8.39% B 10,869,566 Floating 20-M ar-13 6.25% 8.39% 14.64% C 10,869,566 Floating 20-M ar-13 2.25% 8.39% 10.64% Amount Coupon 18.64% Total Maturity Subordination Excess Spread Enhancement Series Class 2006-2 A 100,000,000 Floating 20-Jun-13 10.25% 8.42% B 4,347,827 Floating 20-Jun-13 6.25% 8.42% 14.67% C 4,347,827 Floating 20-Jun-13 2.25% 8.42% 10.67% 18.67% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 13 ABS Monitor August 05, 2009 Exhibit 14: 12-Month Pool Performance M onth 1-Jul-08 1-Aug-08 1-Sep-08 1-Oct-08 1-Nov -08 1-Dec-08 1-Jan-09 1-Feb-09 1-M ar-09 1-Apr-09 1-M ay-09 1-Jun-09 Yield Payment Rate 16.95% 42.24% 16.89% 37.16% 17.16% 40.80% 17.22% 40.60% 17.09% 35.57% 17.02% 41.57% 17.29% 36.43% 17.96% 32.44% 17.82% 38.11% 18.17% 34.78% 16.88% 35.72% 18.90% 39.61% Loss Rate 3.67% 3.83% 3.82% 3.89% 4.29% 4.64% 5.28% 5.27% 5.56% 6.27% 7.28% 6.85% 31-60 0.84% 1.01% 0.90% 0.93% 1.05% 1.14% 1.26% 1.16% 1.11% 1.12% 1.02% 0.95% Delinquencies 61-90 0.47% 0.46% 0.53% 0.51% 0.54% 0.59% 0.67% 0.76% 0.70% 0.69% 0.68% 0.62% 90+ 0.84% 0.87% 0.90% 0.99% 1.03% 1.07% 1.17% 1.28% 1.39% 1.42% 1.39% 1.34% 2004-1 6.76% 6.67% 6.78% 6.81% 6.64% 6.39% 6.01% 5.82% 5.83% 5.09% 3.67% 2.62% 2004-3 7.50% 7.51% 7.72% 7.76% 7.60% 7.37% 7.40% 7.89% 8.67% 8.30% 7.30% 6.23% 2005-1 7.81% 7.79% 7.92% 7.97% 7.89% 8.02% 8.23% 8.55% 8.98% 8.98% 8.48% 8.39% Excess Spread 2005-2 2005-3 7.81% 7.83% 7.79% 7.81% 7.91% 7.94% 7.96% 7.99% 7.89% 7.91% 8.01% 8.04% 8.22% 8.25% 8.55% 8.57% 8.97% 9.00% 8.97% 9.00% 8.48% 8.50% 8.39% 8.41% 2005-4 7.28% 7.19% 7.30% 7.33% 7.16% 6.92% 6.53% 6.33% 6.33% 6.12% 5.36% 5.17% 2006-1 7.81% 7.79% 7.92% 7.97% 7.89% 8.02% 8.23% 8.55% 8.98% 8.98% 8.49% 8.39% 2006-2 7.84% 7.82% 7.95% 8.00% 7.92% 8.05% 8.26% 8.58% 9.01% 9.01% 8.52% 8.42% Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 15: Cards II Performance Trends Pay me nt Rate Y ie ld 19.0% 42% 18.5% % 40% 18.0% % 38% 17.5% 36% 17.0% 34% 32% 16.5% Apr-08 Jul-08 Oct-08 Jan-09 Apr-08 Apr-09 Jul-08 Lo ss Rate Jan-09 Apr-09 Delinque nc ies 1.5% 8% 1.3% 7% % Oct-08 % 6% 1.0% 0.8% 5% 0.5% 4% 0.3% Apr-08 3% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-08 Oct-08 31-60 Jan-09 61-90 Apr-09 90+ Source: RBC Capital Markets Research Sector Perform While the supplemental credit enhancement is well received, we continue to rank Cards II at Sector Perform as notes continue to trade tight relative the credit enhancement offered. As such, we believe current trading levels represent fair value and we maintain our Sector Perform ranking. 14 Altaf Nanji, CFA August 05, 2009 ABS Monitor Golden Credit Card Trust (Royal Bank of Canada) Exhibit 16: Deal Summary Series Class 1999-3 Senior Subordinated Subordination Total Amount Coupon Maturity / OC Excess Spread Enhancement 237,500,000 6.190% 15-Jul-09 5.0% 0.00% 5.00% 12,500,000 7.350% 15-Jul-09 0.0% 0.00% 0.00% Amount Coupon Total Series Class 2005-1 Senior Subordinated Maturity Subordination Excess Spread Enhancement 1,146,000,000 4.047% 15-Jun-10 4.5% 5.81% 10.31% 54,000,000 4.567% 15-Jun-10 0.0% 5.81% 5.81% Amount Coupon Total Series Class 2006-1 Senior Subordinated Maturity Subordination Excess Spread Enhancement 1,146,000,000 4.254% 15-Feb-11 4.5% 5.62% 10.12% 54,000,000 4.734% 15-Feb-11 0.0% 5.62% 5.62% Amount Coupon Total Series Class 2008-1 Senior Subordinated Maturity Subordination Excess Spread Enhancement 500,000,000 5.110% 15-Apr-11 4.5% 4.67% 9.17% 23,561,000 6.860% 15-Apr-11 0.0% 4.67% 4.67% Amount Coupon Total Series Class 2008-2 Senior Subordinated Maturity Subordination Excess Spread Enhancement 500,000,000 5.420% 15-Apr-13 4.5% 4.31% 8.81% 23,561,000 7.420% 15-Apr-13 0.0% 4.31% 4.31% Total Series Class 2008-3 Senior Subordinated Amount Coupon Maturity Subordination 400,000,000 Floating 15-Jul-11 4.5% Excess Spread Enhancement 4.92% 9.46% 19,020,526 6.300% 15-Jul-11 0.0% 4.92% 4.92% Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 17: 12-Month Pool Performance M onth 1-Jul-08 1-Aug-08 1-Sep-08 1-Oct-08 1-Nov -08 1-Dec-08 1-Jan-09 1-Feb-09 1-M ar-09 1-Apr-09 1-M ay-09 1-Jun-09 Yield Payment Rate 13.65% 39.88% 12.82% 36.28% 13.81% 38.63% 13.87% 39.70% 12.81% 35.14% 14.18% 40.76% 13.11% 35.31% 12.41% 31.93% 15.19% 37.29% 13.47% 34.92% 13.44% 36.39% 13.96% 37.24% Loss Rate 2.42% 2.11% 2.52% 2.95% 2.94% 2.70% 3.06% 2.73% 3.98% 3.68% 4.08% 4.00% 31-60 0.76% 0.82% 0.84% 0.87% 0.83% 0.92% 1.11% 1.10% 0.99% 0.98% 0.91% 1.02% Delinquencies 61-90 0.44% 0.45% 0.47% 0.45% 0.51% 0.50% 0.58% 0.67% 0.64% 0.57% 0.61% 0.54% 91+ 0.58% 0.64% 0.66% 0.69% 0.69% 0.74% 0.79% 0.87% 0.90% 0.93% 0.92% 0.90% 1999-3 4.67% 4.62% 4.82% 4.72% 4.44% 4.50% 4.45% 4.39% 3.61% 1.53% -1.54% 0.00% 2005-1 6.78% 6.73% 6.93% 6.83% 6.55% 6.61% 6.32% 6.25% 6.16% 6.07% 5.96% 5.81% Excess Spread 2006-1 2008-1 6.59% 5.61% 6.54% 5.55% 6.75% 5.76% 6.65% 5.65% 6.37% 5.37% 6.43% 5.44% 6.13% 5.15% 6.07% 5.10% 5.98% 5.03% 5.89% 4.94% 5.78% 4.83% 5.62% 4.67% 2008-2 5.22% 5.17% 5.37% 5.27% 4.99% 5.06% 4.78% 4.73% 4.66% 4.57% 4.46% 4.31% 2008-3 6.20% 5.67% 6.03% 5.89% 5.58% 5.58% 5.31% 5.29% 5.27% 5.18% 5.07% 4.92% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 15 ABS Monitor August 05, 2009 Exhibit 18: Golden CCT Performance Trends Y ield Pay ment Rate 16% 42% 40% 15% 38% % % 14% 36% 34% 13% 32% 12% 30% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Apr-08 Jul-08 Lo ss Rate Oct-08 Jan-09 Apr-09 Delinque nc ies 1.2% 4.5% 4.0% 0.9% 3.5% % % 0.6% 3.0% 2.5% 0.3% Apr-08 2.0% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-08 Oct-08 31-60 Jan-09 61-90 Apr-09 91+ Source: RBC Capital Markets Research Sector Perform Our Sector Perform is based on spreads fully reflecting the solid underlying credit metrics and potential for better value in other programs. Loss rates, while increasing, are among the lowest in the peer group and payment rates are among the highest in the peer group. While pool performance has been relatively strong on an absolute basis, subordination levels are thin, in our view, as loss rates are approaching senior-tranche subordination levels. With spreads trading well through non-Schedule 1 bank programs, we think non-Schedule 1 bank programs may offer better value. 16 Altaf Nanji, CFA August 05, 2009 ABS Monitor Master Credit Card Trust (Bank of Montreal) Exhibit 19: Deal Summary Series Class 2006-1 Subordination Total / OC Excess Spread Enhancement Amount Coupon Maturity A 238,750,000 4.380% 21-Nov-09 4.5% 12.99% 17.49% B 5,625,000 4.480% 21-Nov-09 2.25% 12.99% 15.24% C 5,625,000 4.580% 21-Nov-09 0.0% 12.99% 12.99% Amount Coupon Total Series Class Maturity Subordination Excess Spread Enhancement 2006-2 A 955,000,000 4.444% 21-Nov-11 4.5% 12.92% 17.42% B 22,500,000 4.594% 21-Nov-11 2.25% 12.92% 15.17% C 22,500,000 4.744% 21-Nov-11 0.0% 12.92% 12.92% Total Series Class Amount Coupon 2008-1 A 525,000,000 5.240% 21-M ay-13 Maturity Subordination 4.5% Excess Spread Enhancement 12.08% 16.58% B 12,370,000 6.240% 21-M ay-13 2.25% 12.08% 14.33% C 12,370,000 7.240% 21-M ay-13 0.0% 12.08% 12.08% Amount Coupon Total Series Class Maturity Subordination Excess Spread Enhancement 2008-2 A 1,000,000,000 5.30% 21-Aug-12 4.5% 12.02% 16.52% B 23,565,000 6.30% 21-Aug-12 2.25% 12.02% 14.27% C 23,565,000 7.30% 21-Aug-12 0.0% 12.02% 12.02% Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 20: 12-Month Pool Performance Month 1-Jul-08 1-Aug-08 1-Sep-08 1-Oct-08 1-Nov -08 1-Dec-08 1-Jan-09 1-Feb-09 1-Mar-09 1-Apr-09 1-May-09 1-Jun-09 Yield Payment Rate 21.99% 42.37% 21.49% 37.61% 21.78% 40.02% 21.61% 40.56% 21.69% 33.98% 22.80% 40.17% 21.42% 35.59% 21.96% 31.00% 22.55% 36.76% 22.02% 35.03% 21.66% 34.96% 21.83% 37.86% Loss Rate 2.66% 2.88% 2.88% 2.61% 2.67% 2.76% 2.98% 3.51% 3.67% 3.73% 4.09% 4.44% 30-59 1.02% 1.15% 1.13% 0.99% 1.11% 1.20% 1.24% 1.22% 1.14% 1.18% 1.18% 1.13% Delinquencies 60-89 0.45% 0.46% 0.51% 0.47% 0.48% 0.52% 0.61% 0.68% 0.64% 0.62% 0.62% 0.62% 90+ 0.71% 0.73% 0.76% 0.80% 0.85% 0.90% 0.98% 1.06% 1.15% 1.18% 1.18% 1.20% Excess Spread 2006-1 14.93% 14.21% 14.50% 14.60% 14.62% 15.64% 14.04% 14.05% 14.48% 13.89% 13.17% 12.99% 2006-2 14.86% 14.14% 14.43% 14.54% 14.56% 15.74% 13.98% 13.99% 14.42% 13.82% 13.11% 12.92% 2008-1 14.01% 13.29% 13.58% 13.69% 13.71% 14.73% 13.13% 13.14% 13.57% 12.98% 12.26% 12.08% 2008-2 13.96% 13.24% 13.52% 13.63% 13.65% 14.67% 13.07% 13.08% 13.51% 12.92% 12.20% 12.02% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 17 ABS Monitor August 05, 2009 Exhibit 21: Master CCT Performance Trends Y ield Pay ment Rate 23% 45% 40% 22% % % 21% 35% 20% 30% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Apr-08 Jul-08 Lo ss Rate Oct-08 Jan-09 Apr-09 Delinque nc ie s 4.5% 1.3% 4.0% 1.0% % 3.5% % 0.7% 3.0% 2.5% 0.4% 2.0% Apr-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-08 Oct-08 30-59 Jan-09 60-89 Apr-09 90+ Source: RBC Capital Markets Research Sector Perform We maintain our Sector Perform ranking following the same logic as for Golden. Our ranking is a function of spreads fully reflecting the solid underlying credit metrics. Loss rates, while increasing, are among the lowest in the peer group and payment rates are among the highest in the peer group. While pool performance has been relatively strong on an absolute basis, subordination levels are thin, in our view, as loss rates are approaching senior-tranche subordination levels. With spreads trading well through non-Schedule 1 bank programs, we think non-Schedule 1 bank programs may offer better value. 18 Altaf Nanji, CFA August 05, 2009 ABS Monitor Algonquin Credit Card Trust (Capital One) Exhibit 22: Deal Summary Total Series 2005-1 Class A Amount Coupon 397,500,000 3.890 Maturity Subordination Excess Spread Enhancement 15-Oct-10 20.5% 5.25% 25.75% B 50,000,000 4.449 15-Oct-10 10.5% 5.25% 15.75% C 52,500,000 4.779 15-Oct-10 0.0% 5.25% 5.25% Amount Coupon 397,500,000 4.889 Total Series 2006-1 Class A Maturity Subordination Excess Spread Enhancement 15-Jul-11 20.5% 4.40% 24.90% B 50,000,000 5.158 15-Jul-11 10.5% 4.40% 14.90% C 52,500,000 5.459 15-Jul-11 0.0% 4.40% 4.40% Amount Coupon 397,500,000 4.562 Total Series 2007-1 Class A Maturity Subordination Excess Spread Enhancement 15-Jun-12 20.5% 4.73% 25.23% B 50,000,000 4.792 15-Jun-12 10.5% 4.73% 15.23% C 52,500,000 5.092 15-Jun-12 0.0% 4.73% 4.73% Excess Spread 2006-1 8.49% 8.60% 8.50% 8.21% 8.28% 7.98% 7.53% 7.20% 6.58% 5.89% 4.72% 4.40% 2007-1 8.81% 8.93% 8.82% 8.55% 8.62% 8.32% 7.86% 7.54% 6.92% 6.24% 5.05% 4.73% Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 23: 12-Month Pool Performance M onth 1-Jul-08 1-Aug-08 1-Sep-08 1-Oct-08 1-Nov -08 1-Dec-08 1-Jan-09 1-Feb-09 1-M ar-09 1-Apr-09 1-M ay-09 1-Jun-09 Yield Payment Rate 19.96% 10.50% 19.77% 9.19% 20.27% 9.72% 21.06% 9.95% 21.87% 9.87% 20.46% 9.26% 19.73% 8.63% 21.98% 7.97% 19.79% 9.83% 20.31% 9.31% 19.27% 8.92% 20.09% 10.42% Loss Rate 4.20% 4.50% 4.80% 4.82% 5.11% 5.28% 5.42% 5.77% 6.30% 7.53% 7.35% 8.48% 30-59 1.65% 1.76% 1.80% 1.78% 1.85% 1.91% 1.91% 2.02% 1.85% 1.98% 2.52% 2.16% Delinquencies 60-89 0.87% 0.92% 0.93% 0.98% 0.96% 1.02% 1.09% 1.11% 1.08% 1.07% 1.16% 1.37% 90+ 1.67% 1.73% 1.75% 1.81% 1.81% 1.88% 2.03% 2.18% 2.21% 2.26% 2.31% 2.32% 2005-1 9.31% 9.44% 9.36% 9.08% 9.14% 8.82% 8.36% 8.07% 7.45% 6.78% 5.57% 5.25% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 19 ABS Monitor August 05, 2009 Exhibit 24: Algonquin CCT Performance Trends Y ie ld Pay me nt Rate 11% 22% 21% 10% % % 9% 20% 19% 8% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Apr-08 Jul-08 Lo ss Rate 3.0% 8% 2.5% % 1.5% 5% 1.0% 4% 0.5% Apr-08 3% Jul-08 Oct-08 Apr-09 2.0% 6% Apr-08 Jan-09 Delinque nc ies 9% 7% % Oct-08 Jan-09 Apr-09 Jul-08 Oct-08 30-59 Jan-09 60-89 Apr-09 90+ Source: RBC Capital Markets Research Outperform With (1) spreads trading ~300bps back of Schedule 1 bank programs, (2) substantial subordination levels (20.5%) providing ample overall credit enhancement at the senior level, (3) the program exhibiting stable underwriting trends, and (4) yields demonstrating some resilience, we think Algonquin offers a good risk reward trade-off for investors. As such, we rank Algonquin CCT at Outperform. While payment rates are low, they have held relatively steady (which is key). On the downside, we note that liquidity may not match that of Schedule 1 bank deals. 20 Altaf Nanji, CFA August 05, 2009 ABS Monitor Broadway Credit Card Trust (Citibank) Exhibit 25: Deal Summary Total Series Class 2004-2 A Amount Coupon 350,000,000 4.804 Maturity Subordination Excess Spread Enhancement 17-M ar-14 18.50% 3.12% 21.62% B 31,818,182 5.434 17-M ar-14 10.50% 3.12% 13.62% C 15,909,091 5.884 17-M ar-14 6.50% 3.12% 9.62% Amount Coupon Total Series Class Maturity Subordination Excess Spread Enhancement 2008-1 A 525,000,000 5.234 17-Jun-11 15.50% 2.75% 18.25% B 29,167,000 6.084 17-Jun-11 10.50% 2.75% 13.25% C 29,167,000 7.143 17-Jun-11 5.50% 2.75% 8.25% Amount Coupon Total Series Class Maturity Subordination Excess Spread Enhancement 2008-2 A 250,000,000 5.449 17-Jun-13 15.50% 2.52% 18.02% B 13,889,000 6.439 17-Jun-13 10.50% 2.52% 13.02% C 13,889,000 7.659 17-Jun-13 5.50% 2.52% 8.02% Total Series Class Amount Coupon 2008-3 A 500,000,000 Floating 18-Oct-10 Maturity Subordination 18.50% Excess Spread Enhancement 4.88% 23.38% B 34,091,000 Floating 18-Oct-10 12.50% 4.88% 17.38% C 34,091,000 Floating 18-Oct-10 6.50% 4.88% 11.38% Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 26: 12-Month Pool Performance M onth 1-Jul-08 1-Aug-08 1-Sep-08 1-Oct-08 1-Nov -08 1-Dec-08 1-Jan-09 1-Feb-09 1-Mar-09 1-Apr-09 1-M ay-09 1-Jun-09 Yield Payment Rate 18.88% 18.17% 20.81% 16.87% 20.61% 16.54% 19.98% 18.45% 20.34% 15.79% 20.98% 15.85% 19.51% 16.36% 21.77% 14.27% 21.14% 15.41% 19.02% 15.51% 20.79% 14.92% 21.35% 15.94% Loss Rate 5.55% 6.94% 6.84% 6.82% 7.86% 8.61% 7.90% 10.56% 10.16% 9.69% 10.98% 10.77% 30-59 1.43% 1.59% 1.84% 1.68% 1.68% 1.72% 1.74% 1.88% 2.09% 2.04% 1.87% 1.89% Delinquencies 60-89 0.83% 0.89% 0.94% 1.05% 1.00% 1.05% 1.09% 1.13% 1.21% 1.27% 1.29% 1.24% 90+ 1.58% 1.64% 1.71% 1.82% 1.97% 2.03% 2.16% 2.26% 2.37% 2.45% 2.49% 2.60% 2004-2 6.19% 6.80% 7.09% 6.98% 6.43% 5.87% 5.47% 4.99% 4.55% 3.61% 3.31% 3.12% Excess Spread 2008-1 2008-2 7.63% 7.41% 7.04% 6.83% 6.82% 6.60% 6.43% 6.20% 5.92% 5.69% 5.51% 5.29% 5.07% 4.84% 4.55% 4.32% 3.98% 3.73% 3.09% 2.85% 2.63% 2.61% 2.75% 2.52% 2008-3 7.08% 5.90% 5.80% 5.58% 5.77% 5.77% 5.14% 4.90% 4.88% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 21 ABS Monitor August 05, 2009 Exhibit 27: Broadway CCT Performance Trends Pay ment Rate Y ie ld % 22% 19% 21% 18% 20% % 17% 19% 16% 18% 15% 17% 14% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Apr-08 Jul-08 Lo ss Rate 3.0% 10% 2.5% % 1.5% 7% 1.0% 6% 0.5% Apr-08 5% Jul-08 Oct-08 Apr-09 2.0% 8% Apr-08 Jan-09 Delinque nc ie s 11% 9% % Oct-08 Jan-09 Apr-09 Jul-08 O ct-08 30-59 Jan-09 60-89 Apr-09 90+ Source: RBC Capital Markets Research Sector Perform Broadway seems to be reporting credit metrics at the weak end of the performance spectrum, so we maintain our Sector Perform rating. Specifically, we note: (1) loss rates are among the highest in the peer group; (2) delinquencies are exhibiting less positive trends relative to peer programs; and (3) payment rates appear to be declining sharply. Nevertheless, (1) spreads trade well back of Schedule 1 bank peers, adequately compensating for the incremental risk; (2) enhancement levels seem to appropriately reflect loss patterns; and (3) we note that Citi, the trust sponsor, has demonstrated support for the program recently. 22 Altaf Nanji, CFA August 05, 2009 ABS Monitor Eagle Credit Card Trust (PC Bank) Exhibit 28: Deal Summary Total Series 2006-1 Class Amount Coupon Maturity Subordination A 465,000,000 4.441 17-M ar-11 B 17,500,000 4.701 17-M ar-11 C 17,500,000 4.981 17-M ar-11 Excess Spread Enhancement 7.0% 11.90% 18.90% 3.5% 11.90% 15.40% 0.0% 11.90% 11.90% 90+ 0.87% 0.91% 0.92% Excess Spread 2006-1 9.85% 10.34% 10.84% Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 29: 12-Month Pool Performance M onth 1-Jul-08 1-Aug-08 1-Sep-08 Yield Payment Rate 20.94% 45.81% 21.23% 41.56% 22.63% 50.07% 1-Oct-08 21.21% 1-Nov -08 1-Dec-08 Delinquencies 60-89 0.47% 0.53% 0.55% Loss Rate 3.87% 3.88% 3.14% 30-59 0.81% 0.86% 0.92% 43.59% 3.90% 0.87% 0.58% 1.08% 10.67% 22.57% 39.09% 4.66% 0.88% 0.55% 1.20% 10.84% 22.97% 43.43% 5.53% 1.00% 0.54% 1.18% 10.71% 1-Jan-09 21.19% 42.41% 5.71% 1.13% 0.69% 1.32% 10.23% 1-Feb-09 23.39% 37.20% 6.34% 1.23% 0.71% 1.37% 10.09% 1-Mar-09 1-Apr-09 1-M ay-09 1-Jun-09 22.75% 23.79% 23.30% 22.96% 43.41% 40.73% 41.18% 47.10% 6.67% 6.90% 7.45% 6.24% 1.08% 0.99% 0.91% 1.04% 0.72% 0.66% 0.62% 0.59% 1.39% 1.42% 1.30% 1.29% 9.76% 10.17% 9.75% 11.90% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 23 ABS Monitor August 05, 2009 Exhibit 30: Eagle CCT Performance Trends Pay ment Rate Y ie ld 24% 52% 23% 49% 22% % % 21% 46% 43% 20% 40% 19% 18% 37% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Apr-08 Jul-08 Lo ss Rate Oct-08 Jan-09 Apr-09 Delinque nc ie s 8% 1.5% 7% 1.1% % 6% % 0.7% 5% 4% 0.3% Apr-08 3% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-08 O ct-08 30-59 Jan-09 60-89 Apr-09 90+ Source: RBC Capital Markets Research Sector Perform Our Sector Perform rating on Eagle is a function of: (1) healthy payment rates that are among the highest in the peer group; and (2) strong yields that have exhibited resilience despite the weak macro backdrop. However, we note that loss rates are increasing quickly and, in our view, the enhancement ratio would seem to suggest current spread levels offer fair value. 24 Altaf Nanji, CFA August 05, 2009 ABS Monitor Glacier Credit Card Trust (Canadian Tire Bank) Exhibit 31: Deal Summary Series Class 2004-1 Senior Subordinated Subordination Total Amount Coupon Maturity / OC Excess Spread Enhancement 590,625,000 4.274% 20-Nov-09 11.0% 9.04% 20.04% 34,375,000 4.674% 20-Nov-09 5.5% 9.04% 14.54% Amount Coupon 344,925,000 4.187% 19-Nov-10 11.0% 9.12% 20.12% 20,075,000 4.507% 19-Nov-10 5.5% 9.12% 14.62% Amount Coupon 300,000,000 4.271% 18-Nov-11 11.0% 9.04% 20.04% 17,460,000 4.571% 18-Nov-11 5.5% 9.04% 14.54% Total Series Class 2005-1 Senior Subordinated Maturity Subordination Excess Spread Enhancement Total Series Class 2006-1 Senior Subordinated Maturity Subordination Excess Spread Enhancement Total Series Class 2006-2 Senior Subordinated Amount Coupon 238,650,000 4.405% 20-M ay-14 Maturity Subordination 11.0% Excess Spread Enhancement 8.90% 19.90% 13,890,000 4.765% 20-M ay-14 5.5% 8.90% 14.40% Amount Coupon 600,000,000 5.027% 20-Feb-13 11.0% 8.24% 19.24% 34,930,000 6.027% 20-Feb-13 5.5% 8.24% 13.74% Total Series Class 2008-1 Senior Subordinated Maturity Subordination Excess Spread Enhancement Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 32: 12-Month Pool Performance M onth 1-Jul-08 1-Aug-08 1-Sep-08 1-Oct-08 1-Nov -08 1-Dec-08 1-Jan-09 1-Feb-09 1-M ar-09 1-Apr-09 1-May-09 1-Jun-09 Yield Payment Rate 19.63% 28.21% 19.87% 25.15% 20.28% 26.88% 19.88% 27.22% 20.48% 23.73% 21.07% 27.24% 20.24% 25.25% 20.40% 21.84% 19.34% 25.61% 21.69% 23.27% 20.62% 24.50% 21.30% 27.00% Loss Rate 6.40% 6.23% 6.32% 6.22% 8.85% 6.38% 6.50% 7.23% 7.42% 7.71% 7.62% 8.52% 31-60 1.28% 1.41% 1.37% 1.25% 1.30% 1.39% 1.66% 1.74% 1.58% 1.46% 1.47% 1.45% Delinquencies 61-90 0.78% 0.78% 0.80% 0.75% 0.70% 0.74% 0.86% 0.97% 0.96% 0.93% 0.90% 0.87% 91+ 1.55% 1.58% 1.58% 1.56% 1.44% 1.43% 1.51% 1.61% 1.73% 1.79% 1.82% 1.77% 2004-1 9.03% 9.19% 9.36% 9.60% 8.92% 9.19% 9.05% 9.54% 8.61% 8.80% 8.72% 9.04% 2005-1 9.12% 9.28% 9.45% 9.69% 9.01% 9.28% 9.14% 9.63% 8.70% 8.89% 8.80% 9.12% Excess Spread 2006-1 9.04% 9.19% 9.37% 9.61% 8.93% 9.20% 9.05% 9.54% 8.61% 8.80% 8.72% 9.04% 2006-2 8.90% 9.06% 9.23% 9.47% 8.79% 9.06% 8.91% 9.40% 8.48% 8.67% 8.58% 8.90% 2008-1 8.28% 8.44% 8.58% 8.80% 8.11% 8.40% 8.27% 8.76% 7.83% 8.01% 7.92% 8.24% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 25 ABS Monitor August 05, 2009 Exhibit 33: Glacier CCT Performance Trends Y ie ld Pay ment Rate 30% 22% 28% 21% % % 26% 24% 20% 22% 19% 20% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Apr-08 Jul-08 Lo ss Rate Oct-08 Jan-09 Apr-09 De linque nc ies 9% 2.0% 1.5% 8% % % 1.0% 7% 0.5% Apr-08 6% Apr-08 Jul-08 O ct-08 Jan-09 Apr-09 Jul-08 O ct-08 31-60 Jan-09 61-90 Apr-09 91+ Source: RBC Capital Markets Research Sector Perform We maintain our Sector Perform rating on Glacier to reflect that: (1) yields are holding steady; (2) payment rates remain healthy in the mid-20% range; and (3) losses are not showing signs of inordinate deterioration. Enhancement levels seem appropriate considering pool performance, and spreads seem to properly reflect underlying credit metrics. 26 Altaf Nanji, CFA August 05, 2009 ABS Monitor Gloucester Credit Card Trust (B of A / MBNA) Exhibit 34: Deal Summary Subordination Total Amount Coupon Maturity / OC Excess Spread Enhancement A 253,500,000 5.376% 15-M ay-14 16.0% 7.65% 23.65% B 46,500,000 6.486% 15-M ay-14 0.05% 7.65% 7.70% Amount Coupon Series Class 2004-1 Total Series Class Maturity Subordination Excess Spread Enhancement 2006-1 A 422,500,000 4.445% 15-M ar-11 16.0% 7.96% 23.96% B 77,500,000 4.994% 15-M ar-11 0.5% 7.96% 8.46% Amount Coupon Total Series Class Maturity Subordination Excess Spread Enhancement 2006-2 A 300,000,000 Floating 15-Nov-13 14.5% 8.16% 22.70% B 49,000,000 4.909% 15-Nov-13 0.5% 8.16% 8.66% Amount Coupon Total Series Class Maturity Subordination Excess Spread Enhancement 2007-1 A 516,000,000 Floating 15-Jun-10 14.5% 8.04% 22.54% B 84,000,000 5.377% 15-Jun-10 0.5% 8.04% 8.54% Amount Coupon Total Series Class Maturity Subordination Excess Spread Enhancement 2008-1 A 400,000,000 5.340% 15-M ay-13 12.0% 3.79% 15.79% B 52,000,000 7.330% 15-M ay-13 0.5% 3.79% 4.29% Source: RBC Capital Markets Research, Company reports, Bloomberg Exhibit 35: 12-Month Pool Performance M onth 1-Jun-08 1-Jul-08 1-Aug-08 1-Sep-08 1-Oct-08 1-Nov -08 1-Dec-08 1-Jan-09 1-Feb-09 1-M ar-09 1-Apr-09 1-M ay-09 1-Jun-09 Yield Payment Rate 17.57% 14.65% 17.95% 14.68% 17.01% 13.51% 18.34% 14.38% 18.03% 14.35% 16.69% 12.89% 16.97% 13.12% 16.96% 13.08% 16.86% 11.86% 18.46% 13.27% 16.95% 12.46% 16.79% 12.02% 17.47% 12.89% Loss Rate 3.67% 4.12% 4.01% 3.92% 3.82% 3.78% 4.62% 3.90% 5.17% 4.65% 5.41% 5.56% 5.96% 30-59 1.00% 1.04% 1.11% 1.13% 1.07% 1.16% 1.21% 1.22% 1.36% 1.39% 1.35% 1.37% 1.37% Delinquencies 60-89 0.54% 0.51% 0.52% 0.53% 0.55% 0.60% 0.61% 0.64% 0.68% 0.77% 0.73% 0.75% 0.74% 90+ 1.19% 1.13% 1.09% 1.09% 1.06% 1.10% 1.14% 1.25% 1.27% 1.32% 1.43% 1.47% 1.51% 2004-1 8.00% 7.56% 7.55% 7.71% 7.78% 8.00% 7.69% 8.64% 7.92% 8.71% 8.38% 8.34% 7.65% 2006-1 8.31% 7.90% 7.89% 8.04% 8.09% 8.31% 8.00% 8.25% 8.24% 9.03% 8.68% 8.65% 7.96% Excess Spread 2006-2 8.45% 8.03% 8.02% 8.17% 8.23% 8.46% 8.16% 8.41% 8.41% 9.21% 8.87% 8.84% 8.16% 2007-1 8.33% 7.92% 7.91% 8.06% 8.11% 8.34% 8.03% 8.29% 8.29% 9.10% 8.76% 8.73% 8.04% 2008-1 5.87% 5.99% 6.10% 6.03% 6.14% 6.06% 5.39% 5.08% 4.62% 5.12% 4.56% 4.50% 3.79% Source: RBC Capital Markets Research, Company reports, Bloomberg Altaf Nanji, CFA 27 ABS Monitor August 05, 2009 Exhibit 36: Gloucester CCT Performance Trends Pay me nt Rate Y ie ld 16% 20% 15% 19% % % 18% 14% 13% 17% 12% 16% 11% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Apr-08 Jul-08 Lo ss Rate Oct-08 Jan-09 Apr-09 Delinquenc ies 6% 1.7% 1.5% 1.3% 5% % % 1.1% 0.9% 4% 0.7% 0.5% Apr-08 3% Apr-08 Jul-08 O ct-08 Jan-09 Apr-09 Jul-08 Oct-08 30-59 Jan-09 60-89 Apr-09 90+ Source: RBC Capital Markets Research Outperform Our Outperform rating is based on: (1) attractive spread (300bps+ back of Schedule 1 bank programs); (2) strong subordination levels for investors in the senior tranches; and (3) yields that are holding steady in the challenging operating environment. On the downside, we note that (1) Payment Rates are low (although the deterioration has been in line with peers); and (2) liquidity may not match that of Schedule 1 bank deals. 28 Altaf Nanji, CFA August 05, 2009 ABS Monitor Global Credit Research Team Royal Bank of Canada Europe Limited London Roger Appleyard, Head Global Credit Research Hank Calenti, CFA, Analyst Miriam Hehir, Analyst Alastair Whitfield, Associate +44 20 7653 4101 +44 20 7653 4386 +44 20 7653 4175 +44-20-7653-4834 roger.appleyard@rbccm.com hank.calenti@rbccm.com miriam.hehir@rbccm.com alastair.whitfield@rbccm.com RBC Dominion Securities Inc. Toronto Jonathan Allen, CFA, Director, Credit Research (Canada) Matthew Kolodzie, CFA, P.Eng., Analyst Altaf Nanji, CFA, Analyst Jie Liu, Associate Analyst Edward Martinez, Associate (416) 842-3806 (416) 842-6152 (416) 842-6462 (416) 842-6140 (416) 842-5165 jonathan.allen@rbccm.com matthew.kolodzie@rbccm.com altaf.nanji@rbccm.com jie.liu@rbccm.com edward.martinez@rbccm.com (212) 618-3253 (212) 428-6461 (212) 618-3250 (212) 618-3304 phillip.armstrong@rbccm.com christina.boni@rbccm.com adam.leight@rbccm.com sarah.orielly@rbccm.com High Yield Research RBC Capital Markets Corporation New York Phillip Armstrong, Analyst Christina Boni, Analyst Adam Leight, Analyst Sarah O'Rielly, Associate Altaf Nanji, CFA 29 ABS Monitor August 05, 2009 Required Disclosures Conflicts Disclosures This product constitutes a compendium report (covers six or more subject companies). As such, RBC Capital Markets chooses to provide specific disclosures for the subject companies by reference. 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