Synchrony Credit Card Master Note Trust (Series )

Transcription

1 Presale: Synchrony Credit Card Master Note Trust (Series ) This presale report is based on information as of Oct. 24, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Class Preliminary rating(i) Interest rate(ii) Amount (mil. $) Credit support (%) A AAA (sf) Fixed B AA+ (sf)(v) Fixed C AA- (sf)(v) Fixed D(iii) BBB (sf) Fixed (iv) Excess collateral NR N/A N/A (i)the ratings are preliminary and subject to change at any time. (ii)the actual interest rates will be determined on the pricing date. (iii)the class D notes are not being offered publicly. (iv)the class D notes benefit from a spread account that will be funded by excess cash flow if the quarterly excess spread percentage is equal to or less than 5.0%. (v)we generally determine plus and minus stresses by interpolating the stresses for our main rating categories. For example, our 'AA ' stress would equal the 'A' stress plus two-thirds of the difference between the 'A' stress and the 'AA' stress. NR--Not rated. N/A--Not applicable. Profile Expected closing date Nov. 2, Expected payment date Oct. 17, Final payment date Oct. 15, Collateral Distribution date Issuer Primary Credit Analyst: Sanjay Narine, CFA, Toronto ; sanjay.narine@spglobal.com Secondary Contact: Kelly R Luo, New York (1) ; kelly.luo@spglobal.com A pool of private-label and co-branded revolving credit card receivables generated by accounts owned by Synchrony Bank. The 15th of each month (or the following business day), beginning December Synchrony Credit Card Master Note Trust. See complete contact list on last page(s) OCTOBER 24,

2 Profile (cont.) Sponsor and originator Depositor and transferor Servicer and administrator Servicer performance guarantor Owner trustee Indenture trustee Underwriters Synchrony Bank. RFS Holding LLC. Synchrony Financial (BBB-/Stable/--). GE Capital Global Holdings LLC (AA+/Negative/A-1+). BNY Mellon Trust of Delaware (AA-/Stable/A-1+). Deutsche Bank Trust Co. Americas (BBB+/Stable/A-2). MUFG Securities Americas Inc., Merrill Lynch, Pierce, Fenner & Smith Inc., and Wells Fargo Securities LLC. Rationale The preliminary ratings assigned to Synchrony Credit Card Master Note Trust's (Synchrony CCMNT's) class A, B, C, and D asset-backed notes series reflect: Our view that the credit support for each class of notes is sufficient to withstand the simultaneous stresses we apply for each rating category to our 8.5% base-case loss rate assumption, 13.0% base-case payment rate assumption, and 21.5% base-case yield assumption, as well as our stressed purchase rate and excess spread assumptions. All of the stress assumptions outlined above are based on our current criteria and assumptions (see "U.S. Credit Card Securitizations: Methodology And Assumptions," published Aug. 24, 2017). Our expectation that under a moderate ('BBB') stress scenario, all else being equal, our preliminary 'AAA (sf)', 'AA+ (sf)', and 'AA- (sf)' ratings on the class A, B, and C notes, respectively, will remain within one rating category of the preliminary ratings in the next 12 months, and our preliminary 'BBB (sf)' rating on the class D notes will remain within two rating categories of the preliminary rating in the next 12 months, based on our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010). Our view that the 5.5% retained transferor percentage requirement is sufficient to cover dilution risk in this trust. Our view of the credit risk inherent in the collateral loan pool based on our economic forecast, the trust portfolio's historical performance, the collateral characteristics, and vintage performance data. Our opinion of the quality and consistency of Synchrony Bank's account origination, underwriting, account management, and general operational practices and our view of Synchrony Financial's servicing experience. Our expectation for timely interest and ultimate principal payments made by the final payment date based on our stressed cash flow modeling scenarios using assumptions commensurate with the preliminary ratings. The series transaction's underlying payment structure, cash flow mechanics, and legal structure. Changes From The Series Notes The series transaction structure has not changed from that of series , including the issuing entity, eligible accounts and receivables, payment priority, collections and allocation mechanics, usage mechanics, early redemption events, and events of default. There have been no material changes in collateral performance since the previous transaction we rated. OCTOBER 24,

3 Transaction Overview The series transaction has a senior/subordinate structure consisting of four publicly rated classes: A, B, C, and D. The class A notes benefit from credit enhancement in the form of subordination of the class B, C, and D notes; the class B notes benefit from subordination of the class C and D notes; and the class C notes benefit from subordination of class D. All of the classes benefit from a specified amount of unrated excess collateral. A spread account also provides credit enhancement primarily for the benefit of the class D notes. The notes will pay interest monthly, on the 15th of each month (or the next business day), beginning Dec. 15, 2017, at fixed rates to be determined on the pricing date. The series notes have an expected payment date of Oct. 17, Based on the transaction documents, this may follow a controlled accumulation period that is initially designated to start three months before the expected payment date. However, it can be delayed to start one month before the expected payment date, depending on the trust's principal payment rate and its other issuances' payment maturities. The notes may begin paying principal before the expected final payment date if an amortization event occurs (see Principal Payment And The Legal Maturity Date section below). The preliminary ratings address our expectation that timely interest and ultimate principal will be paid by the final payment date, Oct. 15, 2025, which is 36 months following the expected payment date. The notes are secured by a pool of receivables created under Synchrony Bank's private-label and co-branded revolving credit card accounts. The accounts designated to the trust were originated under the bank's retail card platform. Legal Structure The transaction is structured as a true sale of receivables from Synchrony Bank to RFS Holding LLC, the transferor, which then transfers them to the Synchrony CCMNT, a Delaware statutory trust. RFS Holding LLC is a limited liability company formed under Delaware law and is a wholly owned, indirect subsidiary of Synchrony Financial, which is also Synchrony Bank's direct parent and servicer to the trust. Synchrony CCMNT is a master trust that issues notes through discrete series. Each note issuance will be pursuant to an indenture supplement to an indenture between the trust and the indenture trustee, Deutsche Bank Trust Co. Americas. The issuing entity will grant a security interest in the receivables to the indenture trustee, on behalf of the noteholders, to secure the notes and other related liabilities. The trust's structure is consistent with our criteria for bankruptcy-remote special-purpose entities (see "Legal Criteria For U.S. Structured Finance Transactions: Securitizations By SPE Transferors And Non-Code Transferors," published Oct. 1, 2006, and "Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities," published Oct. 1, 2006). In rating this transaction, we will review the legal matters and opinions that we believe are relevant to our analysis as outlined in our criteria. Credit Support According to the transaction documents, the series transaction's credit support is structured as follows: OCTOBER 24,

4 The class A notes receive credit support from the subordination of the class B, C, and D notes and the excess collateral, which equals 27.00% of the initial collateral amount in aggregate. The class B notes receive credit support from the subordination of the class C and D notes and the excess collateral, which equals 20.00% of the initial collateral amount. The class C notes receive credit support from the subordination of the class D notes and the excess collateral, which equals 14.00% of the initial collateral amount. The class D notes receive credit support from excess collateral, which equals 5.00% of the initial collateral amount and an unfunded spread account. Based on the transaction structure, the excess collateral amount is 5.0% of the initial collateral amount. This can decrease during the controlled accumulation period, subject to a floor of 3% of the initial collateral amount, which cannot decline during an early amortization period. As a result, overcollateralization grows as a percentage of the outstanding collateral amount, which will benefit investors in an adverse selection scenario if an early amortization event occurs. The excess collateral amount cannot exceed the outstanding note principal balance minus any deposits in the principal accumulation account. A spread account, which benefits the class D notes, is funded from finance charge collections if the quarterly excess spread percentage is less than 5.0%. The amount trapped increases to an 8.5% maximum if the quarterly excess spread is less than 0.5% (see table 1). The spread account is available to pay interest and principal on the class D notes when due. In our stressed cash flow analyses, only a portion of these excess spread targets are trapped, and we consider the credit support from the excess collateral that also benefits the class D notes. Table 1 Spread Account Quarterly Increases Quarterly excess spread percentage Spread account percentage Greater than or equal to 5.00% 0.00% Less than 5.00% and greater than or equal to 4.50% 2.00% Less than 4.50% and greater than or equal to 4.00% 2.50% Less than 4.00% and greater than or equal to 3.50% 3.50% less than 3.50% and greater than or equal to 3.00% 4.50% Less than 3.00% and greater than or equal to 2.50% 5.50% Less than 2.50% and greater than or equal to 1.50% 6.50% Less than 1.50% and greater than or equal to 0.50% 7.50% Less than 0.50% 8.50% Payment Priority And Allocations The trust will allocate finance charges, losses, and servicing expenses to each series based on a floating allocation percentage. Series is a principal sharing series. The amount of principal collections allocated to each series under the principal allocation percentage will depend on whether series is in the revolving period or in the accumulation or amortization period. Interest Payments Interest on the notes will accrue at a fixed rate based on the principal amount outstanding and will be payable on the OCTOBER 24,

5 15th of each month (or the next business day) beginning Dec. 15, According to the payment priority, finance charge collections, recoveries from the credit card receivables, and investment earnings are used to make the distributions shown in table 2. Table 2 Application Of Finance Charge Collection Priority Payment 1 Indenture trustee, owner trustee, and administrator fees and expenses, each capped at $25,000 per year. 2 The servicing fee. 3 Class A note interest. 4 Class B note interest. 5 Class C note interest. 6 Class D note interest. 7 Pay any of the series' defaults and uncovered dilution. 8 Reimburse previous charge-offs that were not covered by monthly finance charges or reallocated principal. 9 Fund the reserve account to cover interest payment shortfalls for the class A, B, C, and D notes during the controlled accumulation period. 10 Fund the required spread account amount that is available solely for the class D notes. 11 Fund the series' share of any shortfall in the minimum free equity amount (the transferor interest). 12 Unless an early amortization event has occurred, pay any remaining amounts owed to the indenture trustee, owner trustee, and the administrator. 13 Distribute any remaining amounts as shared excess finance charge collections. 14 If an early amortization event has occurred, first, make principal payments sequentially to classes A, B, C, and D, and second, pay any remaining amounts owed to the indenture trustee, owner trustee, and the administrator. 15 Any remainder to the depositor. If finance charge collections, recoveries, and investment earnings are insufficient to pay the series transaction's monthly interest payments or the trustee and servicing fees, the shortfalls will be paid by reallocating amounts from the available principal collections to the extent available. Although this provides liquidity protection for the transaction, if any reallocated principal from finance charge collections are not reimbursed, the collateral amount available to pay the notes' principal balance may be reduced. Reallocated principal collections available to each class of notes are limited by the amount of subordination available to those notes. Principal Payment And The Legal Maturity Date During the revolving period, principal collections are paid to the transferor and then reinvested in new receivables. During the controlled accumulation period, collected principal will be deposited into a principal funding account daily for distribution to the noteholders on the expected payment date. A reserve account will be funded to 0.50% of the note principal balance from finance charge collections to cover any negative carry risk if the investment earnings on the principal funding account are insufficient to make monthly interest payments on the notes during the accumulation period. The reserve account does not need to be funded if the accumulation period is only one month. If an early amortization event occurs, the principal collections allocated to the series transaction will be OCTOBER 24,

6 immediately distributed to the noteholders in the following priority: Class A notes until paid in full; Class B notes until paid in full; Class C notes until paid in full; and Class D notes until paid in full. Early Amortization And Events Of Default Early amortization events include the following: The three-month average portfolio yield (finance charge collections net of defaults and uncovered dilution) is less than the three-month average base rate (monthly interest payments and trustee and servicing fees); The note principal balance is not fully paid on the expected payment date; The transferor fails to transfer the receivables into the trust to maintain the required transferor's interest or fails to transfer the receivables into the trust to maintain the required minimum principal receivables balance; The transferor fails to make a payment or deposit within five business days after it was due; The transferor breaches a covenant, agreement, representation, or warranty or has material inaccuracies regarding a breach for 60 days after notification of such breach; A servicer default occurs; A transferor-related or bank-related bankruptcy, insolvency, liquidation, conservatorship, receivership, or similar event occurs; The trust becomes subject to regulation as an investment company within the meaning of the Investment Company Act of 1940; and An event of default occurs. An event of default will occur if: The trust fails to pay interest when due and payable, and the default continues for 35 days, or it fails to pay principal on the notes when due and payable on the final payment date; A trust-related bankruptcy, insolvency, conservatorship, receivership, liquidation, or similar event occurs; or The trust fails to observe or perform covenants or agreements made in the indenture regarding the notes, and the failure continues for 60 days after the indenture trustee has or the noteholders representing at least 25% of the note principal amount have notified the trust, which requires the failure to be remedied and materially and adversely affects the noteholders' interests during the 60-day period. Originator/Servicer Overview Synchrony Financial is the servicer to the trust. Synchrony Bank (formerly known as GE Capital Retail Bank and GE Money Bank), the main operating, wholly owned subsidiary of Synchrony Financial, is the originator of the trust's portfolio of credit card accounts under its retail card programs. The bank is a member of the Federal Deposit Insurance Corp., an insured federal savings bank that is regulated, supervised, and examined by the Office of the Comptroller of the Currency and subject to the Consumer Financial Protection Bureau's regulations. We consider Synchrony Financial's capital and earnings position "strong" (per our criteria, "Banks: Rating Methodology OCTOBER 24,

7 And Assumptions," published Nov. 9, 2011) in light of its strong regulatory capital ratios, superior earnings generation capacity, and good quality of capital. The company also has a "moderate" risk position, and its business position, funding, and liquidity are considered "adequate," "below average", and "adequate", respectively (see "Synchrony Financial," published May 23, 2017, and "Synchrony Bank Assigned 'BBB' Ratings; Outlook Is Stable," published June 7, 2017). Collateral Overview The notes are secured by a pool of receivables originated by Synchrony Bank under its private-label and co-branded revolving credit card programs with national and regional retailers. The top four rated retail merchants account for approximately 89.8% of the receivables and 78.7% of the number of accounts in the pool (see table 3). Table 3 Trust Composition As Of Sept 30, 2017 Merchant S&P Global Ratings' credit rating % of receivables % of accounts Walmart Stores Inc. (includes Sam's Club) AA/Stable/A J.C. Penney Co. Inc. (includes dual and store cards) B+/Stable/ Lowe's Cos. Inc. A-/Stable/A The Gap Inc. (includes dual and store cards) BB+/Stable/NR Total N/A NR--Not rated. N/A--Not applicable. Synchrony (including through predecessor entities) has been securitizing credit card receivables since 1997 and has an established track record. While we consider the historical performance of a credit card pool relevant in evaluating credit risk, we also use a forward-looking analysis that includes macroeconomic factors and forecasts, such as the unemployment rate, bankruptcies, and household debt, among others, as we believe that these factors could affect consumers' ability to repay their credit card debt. In our opinion, some of the risks that are generally inherent in private-label securitizations include the merchants' performance, financial strength, operations, and relationship with third-party credit card originators. The retail industry in which Synchrony Bank's retailers operate is intensely competitive, and the U.S. retail landscape is undergoing rapid changes. Financially challenged retailers could have an impact on the trust's performance, and we believe that the pool's collateral quality and performance could be affected if the current retailer mix shifts. To reflect this risk in our analysis, we considered how removing certain merchants based on their performance and size could affect the total pool performance and the overall receivables composition in the pool. In our view, various structural features help to mitigate the risk of a shift in pool composition and potential impact on performance, including program agreements with retailers, which have remaining terms of two to 10 years; the retailer mix comprising rated retailers; and Synchrony's ongoing program of replacing private-label credit cards with co-branded credit cards, which allows for receivable generation beyond the retailer mix. OCTOBER 24,

8 Asset Pool Collateral Characteristics When we review credit card trusts, we use peer group comparisons to refine our evaluation of a specific pool relative to similar portfolios based on collateral characteristics. Overall, we believe that the receivables designated to the master trust reflect a relatively well-seasoned, geographically diverse portfolio with an established performance record. We believe it is premature to assess the full effect of recent natural disasters (such as hurricanes, floods, and wildfires) on the performance of the trust's portfolio, and we will continue to monitor the trust's performance and potential impact from these events. As of Sept. 30, 2017, the trust pool comprised $ billion in receivables (from approximately 15 million accounts) with the following characteristics: An average receivables balance of $796; An average credit limit of $4,214; A 18.9% utilization rate; Receivables from accounts seasoned at least five years accounted for 98.8% of the pool; The top five geographic concentrations were Texas (9.7% of the receivables), California (7.4%), Florida (6.3%), North Carolina (5.7%), and New York (4.8%). Obligors whose FICO credit score (most recently refreshed) was at least 660 represented 77% of the receivables, and obligors whose FICO score was 720 or higher represented 38% of the receivables. Collateral Performance We compared Synchrony CCMNT performance with our Private-Label Credit Card Quality Index (PLCCQI; see table 4). For the nine months ended September 2017, Synchrony CCMNT's receivables performance is lagging the PLCCQI. Table 4 Synchrony Credit Card Master Note Trust Portfolio Performance PLCCQI Synchrony CCMNT Nine months ended Sept. 30 Nine months ended Sept. 30 Year ended Dec. 21 Avg. monthly principal receivables outstanding (bil. $) Annual yield (%)(i) Avg. monthly payment rate (%)(ii) Annualized net losses (%)(iii) Delinquency of 30 days of more (%)(iv) (i)the total trust income for the collection period as a percentage of eligible principal receivables (annualized). (ii)the total monthly collections (obligor principal and finance charge payments) as a percentage of total outstanding receivables. (iii)the net losses on principal receivables for the collection period as a percentage of eligible principal receivables (annualized). (iv)the past-due amount for the last collection in the period as a percentage of that month's eligible principal receivables. PLCCQI--S&P Global Ratings' Private-Label Credit Card Quality Index. Synchrony CCMNT-- Synchrony Credit Card Master Note Trust. OCTOBER 24,

9 Loss Performance Our current base-case loss rate assumption for the trust is 8.50%, which is forward-looking and incorporates our views on the retail sector and macroeconomic variables, including our U.S. unemployment forecast. Our 36.0% (4.24x the base-case) 'AAA' stressed annualized peak loss assumption for this trust is within the 3.0x-6.6x range that we established for the U.S. benchmark pool in our criteria. Our assumption reflects that net losses for Synchrony CCMNT are higher than peers' and have trended above the PLCCQI's loss rate since 2012 (see chart 1). We recognize that the retail industry in which Synchrony Bank's retailers operate is undergoing rapid changes and that the pool's collateral quality and performance could be affected if the current retailer mix shifts. Our base case reflects our view that loss rates could spike quickly in this pool during the revolving period due to a rapid shift in the retailer composition. As a result, our base-case assumption is meaningfully above recent trust loss rates, which averaged 5.20% for the nine months ended September 2017 (see chart 1 and table 4). In our cash flow analysis, we assumed that loss rates would rise to the stress levels within 12 months after the amortization period begins for the 'AAA' and 'AA' scenarios and within 18 months for the 'BBB' scenario. Chart 1 OCTOBER 24,

10 Yield Performance Our base-case yield assumption for the pool is 21.5%. Synchrony CCMNT's yield averaged 25.23% for the nine months ended September 2017, below its peers' and the PLCCQI's yield (see chart 2 and table 4). The bank has an ongoing program of replacing private-label credit cards with co-branded credit cards, which allows for receivable generation beyond its retailer mix and associated interchange fees. However, because we believe interchange may not be available to the trust if the card lender becomes insolvent, we generally do not assign any credit to interchange in our yield assumptions for the higher rating categories. Also, for this trust, at the 'AAA' rating level, our stress assumption of 12.0% is 55.81% of our base-case assumption of 21.5%. At the 'AA' and 'BBB' levels, our stress assumptions of 12.5% and 16.1%, respectively, are 58.10% and 75.00%, of our base-case assumption (see table 5). In our 'AAA' to 'AA' category cash flow analyses, we assumed an immediate decline in the stressed portfolio yield due to our assumption that restrictive pricing regulations and competitive pressures, including low introductory and promotional rates, would suppress yield at the time of amortization. In the 'BBB' scenario, yield is assumed to decline to the stressed level over 18 months. Chart 2 OCTOBER 24,

11 Payment Rate Performance The payment rate is the rate at which individuals pay down their balances each month. The payment rate affects the length of time during which asset-backed securities (ABS) investors are subjected to the credit risk of a deteriorating pool of assets. The higher the payment rate, the more quickly investors can be paid out in adverse scenarios. The total payment rate has been gradually increasing for the trust accounts since As of September 2017, the nine-month average payment rate for the trust was 13.92%, which was lower than the PLCCQI's rate of 18.30% (see chart 3 and table 4). Our base-case total payment rate assumption for the pool is 13.0%. Similar to other private-label pools, we apply a slightly higher haircut to our base-case payment rate in our stress scenarios compared with bank credit card pools because we think pure private-label retail credit cards will likely have more limited use should the originator or related stores become insolvent. In our stress scenarios, we assumed that the number of convenience users in the pool declined before the first month in an amortization scenario and the portion of revolvers increased, resulting in a sharp decline in payment rates. Therefore, our base-case assumption is well below the trust's actual payment rate. When modeling our 'AAA', 'AA', and 'BBB' rating scenarios, we assume that payment rates immediately decrease to the stressed level. OCTOBER 24,

12 Chart 3 Purchase Rate The purchase rate is the rate at which new receivables are created and transferred to the trust as cardholders use their credit cards to make purchases or cash advances. The transfer of new receivables affects the level of principal receivables in the trust and the monthly collections available to repay the ABS. When rating credit card ABS, we consider the credit rating on the originator in our purchase rate assumptions; in this case, Synchrony Bank is rated BBB/Stable/-. We assume 0.50%, 1.00%, and 4.00% purchase rate ranges for our 'AAA', 'AA', and 'BBB' rating categories, respectively, in the trust's cash flow runs. The purchase rate assumptions reflect our view of the originator's ability to continue generating and transferring receivables to the trust. In our opinion, the lower the issuer credit rating on the originator, the weaker the seller's ability to generate and transfer receivables to the trust on an ongoing basis. Accordingly, the purchase rate assumption declines as ratings migrate to lower rating categories. We also consider the cards' utility as it relates to co-brand and retail partners and incorporate in our assumptions the strengths, ratings, diversification, and potential shift in composition of these partners in the pool. OCTOBER 24,

13 Dilution Analysis Dilution, which is the noncash reduction in the principal receivables balance from merchandise returns or for any other reason excluding losses and payments, typically runs higher in retail card portfolios than it does in bankcard portfolios. Under the transaction's terms, the minimum transferor's interest will equal at least 5.5% of the principal receivables to cover noncash reductions in the principal receivables balance. In our analysis, we reviewed the trust's monthly dilutions and then staggered dilutions that occurred during the 30-, 60-, and 90-day cycles. We then applied a 'AAA' multiple to the base-case dilution rate to derive the dilution coverage level that we believe is commensurate with the assigned preliminary ratings on the notes. S&P Global Ratings' Rating Scenarios We applied various stresses when assigning our preliminary ratings to the series notes (see table 5; for more information on our assumptions for this transaction and our current criteria, see "General Methodology And Assumptions For Rating Canadian Credit Card ABS," published March 22, 2012, and "U.S. Credit Card Securitizations: Methodology And Assumptions," published Aug. 24, 2017). Table 5 S&P Global Ratings' Credit Rating Scenarios S&P Global Ratings' base-case assumption S&P Global Ratings' 'AAA' rating stresses Net losses(i) Total payment rate(ii) Yield(iii) Purchase rate 8.50% 13.0% 21.5% N/A 4.24x our base case 48.1% of our base case 55.8% of our base case 0.50% S&P Global Ratings' 'AA' rating stresses 3.65x our base case 51.9% of our base case 58.1% of our base case 1.00% S&P Global Ratings' 'BBB' rating stresses 2.00x our base case 71.2% of our base case 75.0% of our base case 4.00% (i)in the 'AAA' and 'AA' rating scenarios, losses start near our base-case assumption and then rise to the stressed multiple in 12 months. In the 'BBB' rating scenario, losses start near our base-case assumption and then rise to the stressed multiple in 18 months. (ii)in all rating scenarios, the total payment and purchase rates start at the stressed level in the first month of the cash flows. (iii)in the 'AAA' and 'AA' rating scenarios, the yield starts at the stressed level in the first month of the cash flows. In a 'BBB' rating scenario, yield starts near our base-case assumption and then decreases to the stressed level over an 18-month period. N/A--Not applicable. Sensitivity Analysis Our ratings incorporate credit stability as one of several factors that we use to determine an issuer's or issue's creditworthiness (see "Methodology: Credit Stability Criteria," published May 3, 2010). Accordingly, we ran sensitivity analyses to determine the notes' credit stability during periods of moderate economic stress. Based on our rating stability definition, preliminary 'AAA' and 'AA' ratings signify that we do not expect the ratings on the notes to fall more than one rating category within 12 months of the assigned rating under moderate stress conditions. In addition, a preliminary 'BBB' rating signifies that we do not expect the rating on the notes to fall more than two rating categories within 12 months of the assigned rating under moderate stress conditions. OCTOBER 24,

14 To test whether the preliminary 'AAA (sf)', 'AA+ (sf)', and 'AA- (sf)' ratings we assigned to the class A, B, and C notes, respectively, would be vulnerable to a downgrade of more than one category in a moderate ('BBB') stress scenario, and to test whether the preliminary 'BBB (sf)' rating we assigned to the class D notes would be vulnerable to a downgrade of more than two categories in a moderate ('BBB') stress scenario, we ran sensitivity analyses assuming that the pool's base-case loss rate would increase to 2.0x the current base-case loss rate. Based on the credit support available to the notes, we believe that within the next 12 months our 'AAA (sf)', 'AA+ (sf)', and 'AA- (sf)' ratings on the notes would notbecome vulnerable to a downgrade by more than one rating category, and the 'BBB (sf)' rating on the notes wouldn't become vulnerable to a downgrade of more than two rating categories. Related Criteria Criteria - Structured Finance - ABS: U.S. Credit Card Securitizations: Methodology And Assumptions, Aug. 24, 2017 Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016 Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Criteria Related To Asset-Backed Securities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Securitizations By SPE Transferors And Non-Code Transferors, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Select Issues Criteria, Oct. 1, 2006 Related Research Economic Research: Americas Country Snapshots, October 2017 U.S. Credit Card Quality Index: First Signs Of Tightening Credit Standards Could Mitigate Impact From Recent Subprime Growth, Sept. 13, 2017 Credit Conditions: Rising Risks In Areas Such As Retail And CRE May Weigh On Credit Conditions In North America, June 29, 2017 Economic Research: The U.S. Economy Goes From Signs Of Shining To As Good As It Gets, June 29, 2017 Synchrony Bank Assigned 'BBB' Ratings; Outlook Is Stable, June 7, 2017 Synchrony Financial, May 23, 2017 Economic Research: U.S. Economic Forecast: I'm Still Standing!, March 30, 2017 Global Structured Finance Outlook 2017, Jan. 4, 2017 Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic OCTOBER 24,

15 Factors, Dec. 16, 2016 Shelf Review: U.S. Private-Label Credit Card ABS, Aug. 23, 2016 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, Analytical Team Primary Credit Analyst: Sanjay Narine, CFA, Toronto ; sanjay.narine@spglobal.com Secondary Contact: Kelly R Luo, New York (1) ; kelly.luo@spglobal.com OCTOBER 24,

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