Royal deal goes public


The first Canadian public credit card securitization in several years has come to market, shining the light on an area of that market which has begun to grow.

The Royal Bank of Canada deal - named Golden Credit Card Trust - features a three-tranche structure with three-, five- and 10-year maturities. The deal could wind up topping out at C$1 billion ($715 million), and has minimums set at C$250 million ($179 million) for the three- and five-year pieces, and C$150 million ($107 million) for the 10-year piece.

"They should have no trouble getting that," said one insider about the C$1 billion aggregate mark. "It's selling extremely well, at least as good a other credit card deals, and maybe a bit better because of the public distribution."

Traders have noticed some tightening of card offerings lately, especially those of the big banks, with spreads coming as close as four basis points over the banker's acceptance rates. "It's a reflection of demand," said one trader. "There'll be more of these Royal-type deals, and soon."

The deal was backed by card balances on Royal's books. The bank's securities arm, RBC Dominion Securities, was the lead and dealt 47% of the issue that could touch C$1 billion ($715 million), but virtually all of Bay Street had a piece, with Toronto Dominion in for 14%, CIBC World Markets, 12%, Merrill Lynch, 7%, and Levesque Beaubien Geoffrion and Nesbitt Burns with 5% each. The bulk of the offering carries an AAA rating from Standard & Poor's, with a smaller residual - about 5% of the total - carrying a BBB rating.

Some players mentioned the size of the deal likely kept some other planned issuance out of the market, but only for a couple of weeks.

While credit card deals certainly aren't unique north of the border, it is the first time the banks have used the public route. Regulatory changes allowing a more streamlined filing procedure will likely see more of these deals in the future, said Louis Neretlis, analyst at Canadian Bond Rating Service.

"Up until now it's been a bit of an ordeal to do a public deal in Canada," he said. "The hope is to drive that market going forward as an avenue to expanding the term market here."

The deal is the first public card deal since landmark retailer Eaton's did its first credit card offering in the early 90s. Interest in the public market in Canada was recently piqued by the Levesque and Merrill-led CMBS issue, backed by assets from the Caisse de Depot et Placement du Quebec, which was also a public deal.

Insiders said the CMBS market will likely see several more of these public deals before year's end. - TC