Summary
American Express Company (AXP) announced on May 22, 2009, proposed actions to address concerns from rating agencies regarding its securitization trusts. These actions are intended to bolster credit enhancement for outstanding asset-backed securities and increase the yield from the Master Trust. The planned measures include the issuance of approximately $1.5 billion in new Series D Certificates by early June 2009, which will provide additional credit support. Furthermore, AXP will designate a percentage of new principal receivables as "Discount Option Receivables" starting May 27, 2009. This is expected to increase the trust excess spread by an estimated 400-600 basis points over time. While these actions are not expected to materially impact the Company's results of operations, they will result in the inclusion of the Master Trust's assets as risk-weighted assets for regulatory capital purposes, potentially reducing capital ratios but expected to remain above well-capitalized levels.
Key Highlights
- 1AXP is implementing measures to enhance credit enhancement and yield for its securitization trusts in response to rating agency concerns.
- 2The company plans to issue approximately $1.5 billion in new Series D Certificates by early June 2009 to bolster credit support for existing securities.
- 3A "Discount Option" will be exercised on new principal receivables starting May 27, 2009, estimated to increase trust excess spread by 400-600 basis points.
- 4These actions are expected to improve the performance and stability of the asset-backed securities issued by the Master Trust and Note Trusts.
- 5The proposed changes will lead to the Master Trust's assets being treated as risk-weighted assets for regulatory capital, which is expected to reduce capital ratios but remain above well-capitalized thresholds.
- 6AXP anticipates these actions will not have a material impact on its operational results, despite the regulatory capital adjustments.