US-American merger 'neutral' for Citibank ABS: Fitch

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Fitch Ratings expects the merger of American Airlines and US Airways to have "minimal impact" on the co-branded credit card asset-backed securities issued by Citibank.

In a 26 March research note, the ratings agency says any decline in card usage is covered under the purchase rate stress scenarios employed in its cash flow modeling.

Earlier this week, Moody's Investors Services issued a report stating the merger between American Airlines and US Airways is "credit positive" for Citibank's credit card trust.

"The merger removes uncertainty about American's ability to continue operating, thus maintaining the value and utility of the AAdvantage credit cards linked to CCCIT [Citibank Credit Card Issuance Trust]," according to Moody's.

The move reverses an earlier Moody's report that said the bankruptcy of American was "credit negative" for the asset-backed notes as cardholders would have made "less use" of their cards, leading to "AAdvantage-related receivables shrinking" as a proportion of the trust's collateral.

American Airlines' co-branded credit cards represent nearly one-quarter of the receivables issued in the Citibank's credit card trust, says Fitch.

Presently, it is unclear whether the rewards programmes offered by American (AAdvantage) and US Airways (Dividend Mile) will be consolidated under a single credit card plan, remain separate, be rebranded and converted under a new credit card, or terminated in their entirety.

"In any of the above cases, the impact to Fitch-rated credit card trusts would be minimal," says the ratings agency.