Fitch Ratings Assigns Ratings to Canvas Cards Trust Series 2025-1

Strategic Insights -

Fitch Ratings, a global credit rating agency, has announced the assignment of ratings to Canvas Cards Trust (Canvas) Series 2025-1, a Canadian dollar-denominated credit card receivables-backed notes issue. The trust's performance has been normalizing from the pandemic-era strength, with recent charge-off performance positively impacted by additional accounts added to the custodial pool by the seller. Despite a slightly weaker charge-off and monthly payment rate (MPR) performance compared to Fitch's Canadian credit card indices, the trust's 60+ day delinquencies and net charge-off decreased to 2.11% and 5.67%, respectively, as of the March 2025 collection period.

Fitch closely examines underlying collateral characteristics, including credit quality, seasoning, geographic concentration, delinquencies, and utilization rate on credit cards. The credit enhancement (CE) is deemed sufficient, with loss multiples in line with the expected ratings and Fitch's applicable criteria. The stable rating outlook reflects Fitch's expectation that performance will remain supportive of the ratings.

Key Takeaways:

  • The Canvas Cards Trust Series 2025-1 issue is backed by undivided co-ownership interests in a revolving pool of general-purpose, Walmart-branded Mastercard credit card receivables originated by Fairstone Bank of Canada.
  • The trust's performance has been normalizing from pandemic-era strength, with recent charge-off performance positively impacted by additional accounts added to the custodial pool by the seller.
  • As of the March 2025 collection period, 60+ day delinquencies and net charge-off decreased to 2.11% and 5.67%, respectively, from 2.58% and 6.72% a year earlier.
  • Credit enhancement is deemed sufficient, with loss multiples in line with the expected ratings and Fitch's applicable criteria.
  • The stable rating outlook reflects Fitch's expectation that performance will remain supportive of the ratings.
  • Fitch considered Fairstone (NR) an effective and capable originator and servicer, as evidenced by historical delinquency and loss performance of the trust's receivables.
  • Fairstone has been originating Walmart-Mastercard credit card receivables since 2010, demonstrating extensive experience in credit card origination and operational stability.
  • Interest rate risk for the notes is mitigated by available credit enhancement (CE).
  • CE supporting class A notes is 14.00%, derived from 8.00% and 6.00% subordination of class B and C notes, respectively.

Statistics:

  • 60+ day delinquencies as of March 2025: 2.11%
  • Net charge-off as of March 2025: 5.67%
  • Charge-off rate (steady state): 10.00%
  • Monthly payment rate (MPR) (steady state): 24.00%
  • Annualized yield (steady state): 23.00%
  • Credit enhancement (CE) supporting class A notes: 14.00%

Sources:

  • Fitch Ratings (no specific date mentioned)
  • Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 29 Nov 2023)
  • Credit Card ABS Rating Criteria (pub. 20 Mar 2024)
  • Structured Finance and Covered Bonds Country Risk Rating Criteria (pub. 20 Jun 2024)
  • Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 24 Oct 2024)
  • Global Structured Finance Rating Criteria (pub. 18 Nov 2024)