Assets of MBNA Master Credit Card Trust II are allocated between the investor and the seller’s interests. As a series matures, the seller’s interest increases and the investor interest declines. The seller is committed by the pooling and servicing agreement (the master agreement) to maintain the seller’s interest at a level that does not drop below 4 percent of the average principal receivables of the trust for the interest period, or, with approval of the credit rating agencies that are monitoring the trust, below 2 percent of the average principal receivables. If the seller’s interest declines below this minimum, an early amortization of the trust’s outstanding series will occur.
The seller has committed to sell all receivables generated from the pool of designated accounts to the master trust. It is up to the seller to decide when to issue a new series of ABSs. When account balances grow above the amount funded by the outstanding series of investor certificates, the seller’s interest increases. When the account balances decline, the seller’s interest declines as existing receivables amortize faster than they are replaced. While a series is in its revolving phase, principal allocations to the series are reinvested in new receivables.
Even when the seller’s interest is declining, due to a combination of high payment rate and low rate of borrowing, the investor interest remains constant because receivables are bought with principal that belongs to the investor interest.
