Fitch Ratings assigns Loss Severity (LS) ratings to 561 classes of $274.7 billion of U.S. credit card receivables asset-backed securities (ABS) issued from 20 trusts. Most senior bonds are assigned 'LS1' or 'LS2' ratings, reflecting the typically large tranche thickness of these classes. Lower LS ratings ('LS3' to 'LS5') are more typical for the mezzanine and subordinate bonds, which usually have a smaller tranche. Criteria delineated in 'Criteria for Structured Finance Loss Severity Ratings', dated Feb. 17, 2009 were applied.

The pool loss expectation varies widely from 0.5% to 11%, causing some trust to have senior bonds with lower LS ratings or mezzanine and subordinate bonds with higher LS ratings. There are few instances of hyper tranching that cause the LS ratings to be low.

For credit card receivables ABS, the pool loss expectation is derived by adjusting the base case default assumption accounting for the base case payment rate assumption. In doing so, the loss expectation reflects the cumulative loss amount of an amortizing pool, rather than a default percentage applied to a revolving pool. LS ratings will be reviewed and adjusted, if necessary, when the corresponding Long-Term Credit (LTC) ratings are reviewed.

Introduced in February 2009, LS ratings are meant to complement the existing LTC ratings for structured finance securities. LTC ratings exclusively address the probability of default of a security. The LS ratings provide an indication of the relative degree of risk that a security might suffer a high loss severity in the event that the security defaults. It will always be necessary to consider loss severity (as indicated by the LS rating) in conjunction with probability of default (as indicated by the LTC rating.) The LS rating scale consists of five rating categories from 'LS1' to 'LS5'. LS ratings are only assigned to securities that have corresponding LTC ratings in rating categories 'AAA' through 'B'. The LS rating category to be assigned will be determined through a calculation that measures the size of the tranche relative to the base expected loss determined for the asset portfolio underlying the transaction.

'Criteria for Structured Finance Loss Severity Ratings', is available at 'www.fitchratings.com'.

The actions are summarized in a spreadsheet detailing tranche level actions that will be available on the Fitch Ratings web site at 'www.fitchratings.com' under the following headers:

Structured Finance >> ABS >> Research

Additional information is available at www.fitchratings.com.

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