Cabela's 2008 Annual Report Download - page 80

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
4. CREDIT CARD LOANS AND SECURITIZATION
WFB has established the Cabela’s Master Credit Card Trust for the purpose of routinely selling and securitizing
credit card loans and issuing beneficial interest to investors. The trust issues variable funding facilities and long-
term notes each of which has an undivided interest in the assets of the trust. Variable rate notes are priced at a
benchmark rate plus a spread. Fixed rate notes are priced on a swap rate plus a spread. At the end of 2008, the trust
had six term series outstanding totaling $1,700,000 and three variable funding facilities with $911,115 in available
capacity and $474,272 outstanding. WFB maintains responsibility for servicing the securitized loans and receives
a servicing fee based on the average outstanding loans in the trust. Servicing fees are paid monthly and reflected
in other non-interest income in Financial Services revenue. The trust is not a subsidiary of WFB or Cabela’s and
is therefore excluded from the consolidated financial statements in accordance with GAAP. These securitizations
qualify as sales under GAAP and accordingly are not treated as debt on the consolidated financial statements. The
credit card loans receivable equal to the investor interest is removed from the consolidated financial statements.
As contractually required, WFB establishes certain cash accounts, to be used as collateral for the benefit
of investors. As of 2008 and 2007, the balances in the cash accounts with the trustee were $8,000 and $12,750,
respectively. In addition, WFB owns asset-backed securities from some of its securitizations, which are subordinated
to other notes issued.
WFB’s retained interests in credit card asset securitizations include a transferor’s interest, asset-backed
securities, accrued interest receivable on securitized credit card receivables, cash accounts, servicing rights, the
interest-only strip, cash reserve accounts, and other retained interests. The transferor’s interest is represented by
security certificates and is reported in credit card loans held for sale. WFB’s transferor’s interest ranks pari passu
with investors’ interests in the securitization trusts. The remaining retained interests are subordinate to certain
investors’ interests, and as such, may not be realized by WFB if needed to absorb deficiencies in cash flows that are
allocated to the investors of the trusts.
WFB’s retained interest and related receivables are comprised of the following:
2008 2007
Investments in asset-backed securities - trading securities $ 31,584 $12,650
Interest-only strip, cash reserve accounts, and cash accounts 30,021 39,127
Transferor’s Interest 143,411 166,700
Other assets - accrued interest receivable, and amounts due from trust 32,379 25,222
Total $ 237,395 $243,699
WFB’s retained interests are subject to credit, payment and interest rate risks on the transferred credit card
receivables. To protect investors, the securitization structures include certain features that could result in earlier-
than-expected repayment of the securities, which could cause WFB to sustain a loss of one or more of its retained
interests and could prompt the need for WFB to seek alternative sources of funding. The primary investor protection
feature relates to the availability and adequacy of cash flows in the securitized pool of receivables to meet contractual
requirements, the insufficiency of which triggers early repayment of the securities. WFB refers to this as the “early
amortization” feature. Investors are allocated cash flows derived from activities related to the accounts comprising
the securitized pool of receivables, the amounts of which reflect finance charges collected, certain fee assessments
collected, allocations of interchange, and recoveries on charged off accounts. From these cash flows, investors are
reimbursed for charge-offs occurring within the securitized pool of receivables and receive a contractual rate of
return and WFB is paid a servicing fee as servicer. Any cash flows remaining in excess of these requirements are
paid to WFB and recorded as excess spread, included in securitization income. An excess spread of less than 0% for
a contractually specified period, generally a three-month average, would trigger an early amortization event. Once