Spiga

What Asset Backed really means??




ON THIS NOTATION, THE BOLD FONT SUGGESTS MY QUESTION. ACCORDING TO MODERN GAAP STANDARDS, THIS TYPE OF "ASSET" IS VERY CONFORMING. BUT IF THE STREAM OF INCOME ENDS, IS IT STILL AN ASSET?

Preliminary Ratings As Of Aug. 17, 2005
Class Preliminary rating* Preliminary amount (mil. $) Recommended credit support (%)
A AAA 584.5 16.5
B A 52.5 9.0
Collateral interest N.R. 63.0 N/A
*The rating of each class of securities is preliminary and subject to change at any time. N.R.—Not rated. N/A—Not applicable.

Credit Support

Credit support for the class A certificates is provided by the subordination of the class B certificates and the unrated collateral invested amount. Credit support for the class B certificates is provided by the collateral invested amount.


Rationale

The preliminary ratings assigned to American Express Credit Account Master Trust's certificates series 2005-7 reflect credit enhancement of 16.5% for the class A certificates and 9.0% for the class B certificates, strong and stable historical portfolio performance, and structural considerations.

Collateral Interest And Secured Notes

The collateral interest serves as credit protection for the class A and B certificates. Cash flows allocated to the collateral interest, together with any remaining excess finance charge collections available from the master trust, will be transferred to American Express Credit Account Secured Note Trust Series 2005-7 (the owner trust). Notes issued out of the owner trust will be privately placed and rated 'BBB' by Standard & Poor's in a separate transaction. The 'BBB' notes are backed by the cash flow allocated to the excess collateral tranche and a dedicated spread account, which is funded by excess cash flow if certain performance thresholds are breached. The spread account is available to cover the notes' monthly interest to the extent the monthly cash flows are insufficient. On the notes' legal maturity date, amounts in the spread account may be used to pay down the remaining outstanding balance of the notes and to reimburse noteholders for any losses incurred. The expected maturity date of the notes is Aug. 15, 2012, and the legal maturity date is March 16, 2015.

Description Of Collateral

The primary assets of the trust are receivables in designated American Express credit cards (whether branded Optima Card or otherwise), Optima Line of Credit, Sign and Travel, and special-purchase revolving credit accounts. The aggregate amount of credit card receivables in the American Express Credit Account Master Trust, as of June 30, 2005, totaled approximately $27.760 billion, and comprised $27.013 billion in principal receivables and $747.400 million in finance charge receivables. The table summarizes the historical portfolio performance of the total lending portfolio and includes the receivables in the master trust.



--Year-Ended Dec. 31--

2005* 2004 2003 2002
Avg. receivables outstanding (mil. $) 32,944.28 31,056.25 28,201.41 25,233.90
Yield from finance charges and fees (%) 17.43 17.02 16.48 17.54
Avg. monthly payment rate (%) 26.89 25.00 22.45 20.49
Delinquencies of 30 days or more (%) 2.32 2.45 2.83 3.12
Net charge-offs (%) 3.69 4.08 4.87 5.43
*Five months ended May 31.

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