Fitch Rates World Financial Network Credit Card Master Note Trust, Series 2016-A
--$650,000,000 class A fixed-rate 'AAAsf'; Outlook Stable;
--$32,500,000 class M zero-rate 'AAsf'; Outlook Stable;
--$41,166,000 class B zero-rate 'A+sf'; Outlook Stable;
--$108,334,000 class C zero-rate 'BBBsf'; Outlook Stable;
--$34,667,000 class D zero-rate 'NR'.
KEY RATING DRIVERS
Fitch's ratings are based on the underlying receivables pool, available credit enhancement, Comenity Bank's underwriting and servicing capabilities, and the transaction's legal and cash flow structures, which employ early redemption triggers.
The transaction has adequate credit enhancement, totalling 25.00% for the class A notes, 21.25% for the class M notes, 16.50% for the class B notes, and 4.00% for the class C notes.
RATING SENSITIVITIES
Fitch models three different scenarios when evaluating the rating sensitivity compared to expected performance for credit card asset-backed securities transactions: 1) increased defaults; 2) a reduction in purchase rate, and 3) a combination stress of higher defaults and lower monthly payment rate (MPR).
Increasing defaults alone has little impact on rating migration except in the most severe scenario of a 75% increase in defaults, which could result in downgrades. The rating sensitivity to a reduction in purchase rate is less pronounced, with no rating migration even in the severe scenario. The harshest scenario assumes increased defaults and reduced MPR simultaneously. All classes could be downgraded under the moderate stress of a 50% increase in defaults and 25% reduction in MPR.
To date, the transactions have exhibited strong performance with all performance metrics within Fitch's initial expectations. For further discussion of our sensitivity analysis, please see the related presale report. For a discussion of the representations, warranties, and enforcement mechanisms available to investors in this transaction please see the related presale appendix.
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