Mercury Financial is breaking the ice in the 2021 credit card ABS market with an initial securitization of $ 750 million of non-prime and subprime MasterCard accounts receivable.

Mercury Financial Credit Card Master Trust (MFCCMT) Series 2021-1 is the first public issue of asset-backed securities by Austin, Texas-based Mercury, according to a pre-sale report released by credit rating agency Kroll Bond.

The Notes are secured by accounts receivable from a $ 1.2 billion pool of credit card account balances managed by Mercury. About 84% of the collateral accounts are legacy Barclaycard accounts that Mercury (then operating as Credit Shop) acquired in March 2017 when it absorbed $ 1.6 billion in risky credit card balances from the former American card company of Barclays.

Mercury has been issuing its own cards since 2019, but most of the outstanding balances it manages in its mortgage portfolio are old accounts (totaling $ 1 billion, as of December 2020, according to Kroll).

The accounts are subprime with an average borrower’s FICO score of 668 in the transaction. But the 711,293 accounts included as collateral mostly belong to millennials (average age 20-30) who earn between $ 50,000 and $ 75,000 per year and actively use 2-5 credit cards, according to one. Kroll Bond rating agency report.

Their lines of credit are between $ 3,000 and $ 5,000, with utilization rates above 60%. By comparison, average credit limits are $ 9,500 and utilization rates around 11% in blue chip ABS pools sponsored by “Big Six” bank card trusts (Capital One, Bank of America, Citi, Chase, Discover and American Express), according to Moody’s Investor Service.

Although Mercury manages cardholder accounts, it does not have a bank charter and uses the South Dakota Chartered First Bank & Trust to create and maintain the accounts on its books.

Mercury, founded in 2013 (with the help of an investment from Chinese social media company Renren), was itself acquired by Värde Partners in November 2017.

The Master Trust’s series 2021-1 issue will consist of four classes of notes. $ 526.97 million of Class A Notes have a preliminary Kroll A rating; Class B (BBB) ​​and Class C (BB) are each sized at $ 88.8 million, while a Class D (B) subordinate tranche totals $ 45.4 million.

Kroll estimates that Mercury will have a total gross return of 17.38% from the issuance of the Notes, after application of the Average Coupon (3.03%) and a management fee of 2%.

The transaction will have a two-year non-amortizing renewal period for Mercury to add new accounts to the pool, with no concentration limit.

Although the issue is Mercury’s first public ABS issue, it has already completed private placements, including its most credited CreditShop Credit Card Co. 2019-1 deal for which the notes will be redeemed from the proceeds of the MFCCMT. 2021-1.

The only other ABS transaction by bank card was the NewDay Funding Master Issuer Plc published in january. Although secured by credit card accounts held by UK cardholders, it included a tranche of US dollar denominated notes for North American investors.

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