Firm plays its cards right with credit deal

Clifford Chance broke new legal ground when it advised on the UK's first-ever credit card-backed securitisation.

A team headed by finance partner Chris Field acted for MBNA International Bank, the second-biggest credit card issue in the US, in a £207.5 million securitisation of credit card cash flow (receivables).

“It was a highly challenging transaction in terms of structuring the deal,” said Field.

Credit card securitisation is a huge US market, with around $125 billion such deals outstanding and a further $50 billion expected to be issued this year.

The market in the UK is now expected to take off.

Securitisation is the process by which companies and banks achieve regulatory and accounting off-balance sheet treatment by selling and re-packaging income-producing assets and raising finance in the capital markets. The MBNA deal represents a breakthrough in terms of the revolving nature of the credit card debts and also the UK legal structure used.

Clifford Chance spent 15 months working with MBNA International and Credit Suisse First Boston to develop a legal structure whereby credit card receivables originated by MBNA International are acquired on a revolving basis by a single-purpose company. This company holds them on trust for a number of beneficiaries, including MBNA, which provides funding and which is entitled to collections from the receivables.

Herbert Smith acted for Bankers Trustee Company, trustee for the notes. US firm Mayer Brown & Platt's London office acted for Credit Suisse, which provided a cash collateral loan to the deal.