OREANDA-NEWS. The partnership between American Express and Costco set to end early next year is expected to have negligible impact to existing credit card ratings of American Express Credit Account Master Trust (AECAMT) and American Express Issuance Trust II (AEITII), according to Fitch Ratings. American Express, the biggest U.S. credit-card issuer by customer purchases, is the only credit card currently accepted at Costco stores. We rate approximately \$17 billion of AECAMT and \$4 billion of AEITII.

Contract renewal risk has the potential to cause deterioration in trust performance. In this case, a non-renewal can slow overall annual spending on its cards and, in turn, cause a disruption to the generation of new receivables to support outstanding bonds for the trusts. This can result in early amortization. However, we believe this risk will be adequately mitigated in AECAMT and AEITII by the levels of available credit enhancement and structural protections afforded to investors in these trusts. We believe that the notes issued by these trusts maintain ample cushion to absorb any performance deterioration of the securitized credit card receivables.

We model this type of deterioration in performance under multiple stress scenarios in Fitch's cash flow modeling. In addition to modeling a partial purchase rate stress scenario for AECAMT, we also modeled a full purchase rate stress for both AECAMT and AEITII (which assumes no generation of new receivables during an early amortization period). Even under these extreme scenarios, break-even multiples for the trusts remain consistent with existing ratings.

The co-brand relationship and merchant acceptance agreement with Costco Wholesale Corp., the largest U.S. warehouse-club chain, is set to end in the U.S. on March 31, 2016. Presently, Costco Cards account for one out of every 10 American Express Cards in circulation.

More than 70% of the spending from the Costco Amex cards takes place outside of Costco, American Express reports. The company has stated that it will approach these customers with alternative Amex products. Costco, which replaced American Express in Canada last year, will need to look for new bids for both an issuer and a payments network for its U.S. cards.