DBRS Morningstar Assigns New Ratings to Continental Credit Card ABS 2019-1, LLC

DBRS, Inc. (DBRS Morningstar) assigned ratings to the following notes issued by Continental Credit Card ABS 2019-1, LLC (CCCABS 2019-1):

-- $77,910,000 Class A Notes rated A (sf)
-- $22,170,000 Class B Notes rated BBB (sf)
-- $27,540,000 Class C Notes rated BB (low) (sf)

These notes are currently also rated by DBRS Morningstar’s affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these notes Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about December 10, 2019. In accordance with MCR’s engagement letter covering these notes, upon withdrawal of MCR’s outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. Information about the MCR ratings, including the history of the MCR ratings, can be found at https://ratingagency.morningstar.com/MCR/ratings-surveillance/transaction-detail/Continental%20Credit%20Card%20ABS%202019-1%2c%20LLC.

The ratings are based on a review by DBRS Morningstar of the following analytical considerations:

-- Transaction capital structure, ratings and form and sufficiency of available credit enhancement.
-- Credit enhancement in the form of a subordinated note, overcollateralization, a reserve account and Excess Spread.
-- Continental Finance Company, LLC (CFC or the Company) is a privately held company that is owned directly or indirectly by its founders. The founders and principals at the Company are all veterans of the credit card lending and consumer banking industries. The origination experience and performance history of CFC began in 2006, although originations were halted between 2009 and 2011.
-- The Bank of Missouri (pursuant to an assumption agreement for Mid America Bank) and Celtic Bank Corporation (Celtic) are the Sellers in the transaction. The Sellers originated all the credit card accounts. The Sellers will continue to transfer accounts and related receivables on an ongoing basis.
-- DBRS Morningstar reviewed the operational risk information originally provided to MCR for CFC and conducted an update call with the Company. As a result, DBRS Morningstar deems it to be an acceptable servicer of credit card transactions.
-- Center One, LLC is the sub-servicer for this transaction. DBRS Morningstar reviewed the operational risk information originally provided to MCR, conducted an update call and performed an onsite visit of the company. As a result, DBRS Morningstar deems it to be an acceptable sub-servicer of this credit card transaction.
-- Vervent, LLC (Vervent; formerly known as First Associates Loan Servicing, LLC) is the backup servicer on this transaction. DBRS Morningstar has performed an operational risk review of Vervent and deems it to be an acceptable backup servicer of this credit card transaction.
-- Three-month average Excess Spread as reported on October 2019 is approximately 41.54% for CCCABS 2019-1 per year due to the fees collected by the servicer.
-- The CCCABS 2019-1 securitization base-case charge-off rate is 37.0%. The charge-off rate for this transaction is 2.09% as of October 2019. The loss coverage multiples are slightly below the DBRS Morningstar range multiples set forth in the methodology for this asset class. DBRS Morningstar believes that this is warranted given the magnitude of the base-case charge-off rate and structural features of this transaction.
-- DBRS Morningstar’s principal payment rate base-case assumption for the principal payment rate is 7.5% for CCCABS 2019-1.
-- DBRS Morningstar’s base-case variable for yield is 50.0% for CCCABS 2019-1.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuing Entity, the non-consolidation of the special-purpose vehicle with CFC, the fact that the trust has a valid first-priority security interest in the assets and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Credit Card Asset-Backed Securities, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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