Prospectus Supplement dated June 15, 2004
to Prospectus dated May 26, 2004
MBNA Credit Card Master Note Trust
Issuer
MBNA America Bank, National Association
Originator of the Issuer
MBNAseries
The issuer will issue and sell:
Class C(2004-2) Notes
$275,000,000
one-month LIBOR plus
0.90% per year
15th day of each month,
beginning in August 2004
June 16, 2014
November 15, 2016
July 1, 2004
$275,000,000 (or 100%)
$1,512,500 (or 0.55%)
$273,487,500 (or 99.45%)
Principal amount
Interest rate
Interest payment dates
Expected principal payment date
Legal maturity date
Expected issuance date
Price to public
Underwriting discount
Proceeds to the issuer
The Class C(2004-2) notes are a tranche of the Class C notes of the MBNAseries. Interest and principal payments on Class C
notes of the MBNAseries are subordinated to payments on Class A and Class B notes.
You should consider the discussion under “Risk Factors” beginning on page S-14 in this prospectus supplement
and on page 15 of the accompanying prospectus before you purchase any notes.
The notes are obligations of the issuer only and are not obligations of any other person. Each tranche of notes is secured
by only some of the assets of the issuer. Noteholders will have no recourse to any other assets of the issuer for the
payment of the notes.
The primary asset of the issuer is the collateral certificate, Series 2001-D, representing an undivided interest in MBNA
Master Credit Card Trust II, whose assets include a portfolio of consumer revolving credit card accounts.
The notes are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency
or instrumentality.
Neither the SEC nor any state securities commission has approved these notes or determined that
this prospectus supplement or the prospectus is truthful, accurate or complete. Any representation
to the contrary is a criminal offense.
Underwriters
JPMorgan
Banc of America Securities LLC
Citigroup
Deutsche Bank Securities
Lehman Brothers
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
We provide information to you about the notes in two separate documents that
progressively provide more detail: (a) this prospectus supplement, which will describe the
specific terms of the MBNAseries and the Class C(2004-2) notes and (b) the accompanying
prospectus, which provides general information about each series of notes which may be
issued by the MBNA Credit Card Master Note Trust, some of which may not apply to the
MBNAseries or the Class C(2004-2) notes.
This prospectus supplement may be used to offer and sell the Class C(2004-2) notes only
if accompanied by the prospectus.
This prospectus supplement may supplement disclosure in the accompanying prospectus.
If the terms of the MBNAseries or the Class C(2004-2) notes vary between this prospectus
supplement and the accompanying prospectus, you should rely on the information in this
prospectus supplement.
You should rely only on the information provided in this prospectus supplement and the
accompanying prospectus including the information incorporated by reference. We have not
authorized anyone to provide you with different information. We are not offering the Class
C(2004-2) notes in any state where the offer is not permitted. We do not claim the accuracy of
the information in this prospectus supplement or the accompanying prospectus as of any date
other than the dates stated on their respective covers.
We include cross-references in this prospectus supplement and in the accompanying
prospectus to captions in these materials where you can find further related discussions. The
Table of Contents in this prospectus supplement and in the accompanying prospectus provide
the pages on which these captions are located.
S-2
Table of Contents
Page
Prospectus Supplement Summary . . .
Securities Offered . . . . . . . . . . . . . .
The MBNAseries . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . .
Principal . . . . . . . . . . . . . . . . . . . . .
Nominal Liquidation Amount . . . . .
Subordination; Credit
Enhancement . . . . . . . . . . . . . . . .
Required Subordinated Amount . . .
Class C Reserve Account . . . . . . . .
Early Redemption of Notes . . . . . .
Optional Redemption by the
Issuer . . . . . . . . . . . . . . . . . . . . . .
Events of Default . . . . . . . . . . . . . .
Master Trust II Assets and
Receivables . . . . . . . . . . . . . . . . .
Key Operating Documents . . . . . . .
Issuer Accounts . . . . . . . . . . . . . . . .
Security for the Notes . . . . . . . . . . .
Limited Recourse to the Issuer . . . .
Accumulation Reserve Account . . .
Shared Excess Available Funds . . .
Stock Exchange Listing . . . . . . . . .
Ratings . . . . . . . . . . . . . . . . . . . . . .
Page
S-5
S-5
S-6
S-6
S-6
S-7
S-7
Payments Received from
Derivative Counterparties . . . .
The Issuer Accounts . . . . . . . . . .
Limited Recourse to the Issuer;
Security for the Notes . . . . . . .
Early Redemption of the Notes . . .
Deposit and Application of Funds . . .
MBNAseries Available Funds . . . .
Application of MBNAseries
Available Funds . . . . . . . . . . . . .
Targeted Deposits of MBNAseries
Available Funds to the Interest
Funding Account . . . . . . . . . . . .
Allocation to Interest Funding
Subaccounts . . . . . . . . . . . . . . . .
Payments Received from
Derivative Counterparties for
Interest on Foreign Currency
Notes . . . . . . . . . . . . . . . . . . . . . .
Deposits of Withdrawals from the
Class C Reserve Account to the
Interest Funding Account . . . . . .
Allocations of Reductions from
Charge-Offs . . . . . . . . . . . . . . . .
Allocations of Reimbursements of
Nominal Liquidation Amount
Deficits . . . . . . . . . . . . . . . . . . . .
Application of MBNAseries
Available Principal Amounts . . .
Reductions to the Nominal
Liquidation Amount of
Subordinated Classes from
Reallocations of MBNAseries
Available Principal Amounts . . .
Limit on Allocations of
MBNAseries Available Principal
Amounts and MBNAseries
Available Funds . . . . . . . . . . . . . .
S-7
S-8
S-8
S-9
S-10
S-10
S-10
S-11
S-11
S-11
S-12
S-12
S-12
S-13
S-13
Risk Factors . . . . . . . . . . . . . . . . . . . . S-14
Glossary . . . . . . . . . . . . . . . . . . . . . . . S-19
The Notes . . . . . . . . . . . . . . . . . . . . . .
Subordination of Interest and
Principal . . . . . . . . . . . . . . . . . . .
Issuances of New Series, Classes
and Tranches of Notes . . . . . . . .
Conditions to Issuance . . . . . . . .
Required Subordinated Amount . .
Waiver of Issuance Conditions . .
Sources of Funds to Pay the Notes . .
The Collateral Certificate . . . . . .
S-19
S-19
S-20
S-20
S-21
S-22
S-22
S-22
S-3
S-23
S-23
S-24
S-24
S-25
S-25
S-26
S-27
S-28
S-28
S-28
S-29
S-30
S-30
S-32
S-34
Page
Targeted Deposits of MBNAseries
Available Principal Amounts to
the Principal Funding Account . . .
Allocation to Principal Funding
Subaccounts . . . . . . . . . . . . . . . . .
Limit on Deposits to the Principal
Funding Subaccount of
Subordinated Notes; Limit on
Repayments of all Tranches . . . .
Payments Received from Derivative
Counterparties for Principal . . . . .
Deposits of Withdrawals from the
Class C Reserve Account to the
Principal Funding Account . . . . .
Withdrawals from Interest Funding
Subaccounts . . . . . . . . . . . . . . . . .
Withdrawals from Principal
Funding Account . . . . . . . . . . . . .
Sale of Credit Card Receivables . . .
Targeted Deposits to the Class C
Reserve Account . . . . . . . . . . . . .
Withdrawals from the Class C
Reserve Account . . . . . . . . . . . . .
Targeted Deposits to the
Accumulation Reserve Account . . .
Withdrawals from the Accumulation
Reserve Account . . . . . . . . . . . . . .
Final Payment of the Notes . . . . . . .
Pro Rata Payments Within a
Tranche . . . . . . . . . . . . . . . . . . . .
Page
Shared Excess Available Funds . .
MBNA and MBNA Corporation . . .
S-37
S-38
S-47
MBNA’s Credit Card Portfolio . . . .
Billing and Payments . . . . . . . . . .
Delinquencies and Collection
Efforts . . . . . . . . . . . . . . . . . . . .
Renegotiated and Re-Aged
Accounts . . . . . . . . . . . . . . . . .
S-35
S-46
S-47
S-47
S-48
S-49
The Master Trust II Portfolio . . . . . .
Delinquency and Principal
Charge-Off Experience . . . . . . .
Revenue Experience . . . . . . . . . . .
Interchange . . . . . . . . . . . . . . . . . .
Principal Payment Rates . . . . . . . .
The Receivables . . . . . . . . . . . . . .
Recent Additions to the Master
Trust II Portfolio . . . . . . . . . . . .
S-50
S-52
S-53
S-54
S-54
Underwriting . . . . . . . . . . . . . . . . . . .
S-60
S-43
Glossary of Defined Terms . . . . . . . .
S-62
S-44
Annex I:
Outstanding Series, Classes and
Tranches of Notes . . . . . . . . . . . A-I-1
S-39
S-39
S-39
S-40
S-42
S-45
S-49
S-57
Annex II:
Outstanding Master Trust II
Series . . . . . . . . . . . . . . . . . . . . . A-II-1
S-45
S-46
S-46
S-4
Prospectus Supplement Summary
This summary does not contain all the information you may need to make an informed
investment decision. You should read the entire prospectus supplement and the accompanying
prospectus before you purchase any notes.
Securities Offered
New Series, Classes and Tranches of Notes”
in this prospectus supplement and in the
prospectus. The expected principal payment
dates and legal maturity dates of tranches of
senior and subordinated classes of the
MBNAseries may be different. Therefore,
subordinated notes may have expected
principal payment dates and legal maturity
dates earlier than some or all senior notes of
the MBNAseries. Subordinated notes will
generally not be paid before their legal
maturity date unless, after payment, the
remaining outstanding subordinated notes
provide the credit enhancement required for
the senior notes.
$275,000,000 Floating Rate Class
C(2004-2) notes.
These Class C(2004-2) notes are part of a
series of notes called the MBNAseries. The
MBNAseries consists of Class A notes,
Class B notes and Class C notes. These
Class C(2004-2) notes are a tranche of the
Class C notes of the MBNAseries.
These Class C(2004-2) notes are issued by,
and are obligations of, the MBNA Credit
Card Master Note Trust. The issuer expects
to issue other classes and tranches of notes
of the MBNAseries which may have
different interest rates, interest payment
dates, expected principal payment dates,
legal maturity dates and other
characteristics. In addition, the issuer may
issue other series of notes which may have
different interest rates, interest payment
dates, expected principal payment dates,
legal maturity dates and other
characteristics. See “The Notes—Issuances
of New Series, Classes and Tranches of
Notes” in this prospectus supplement and in
the prospectus.
In general, the subordinated notes of the
MBNAseries serve as credit enhancement
for all of the senior notes of the
MBNAseries, regardless of whether the
subordinated notes are issued before, at the
same time as, or after the senior notes of
the MBNAseries. However, certain
tranches of senior notes may not require
subordination from each class of notes
subordinated to it. For example, if a
tranche of Class A notes requires credit
enhancement solely from Class C notes,
the Class B notes will not, in that case,
provide credit enhancement for that tranche
of Class A notes. The amount of credit
exposure of any particular tranche of notes
is a function of, among other things, the
total amount of notes issued, the required
subordinated amount, the amount of usage
of the required subordinated amount and
the amount on deposit in the senior
tranches’ principal funding subaccounts.
Each class of notes in the MBNAseries may
consist of multiple tranches. Notes of any
tranche can be issued on any date so long as
there is sufficient credit enhancement on
that date, either in the form of outstanding
subordinated notes or other forms of credit
enhancement. See “The Notes—Issuances of
S-5
Only the Class C(2004-2) notes are being
offered through this prospectus
supplement and the accompanying
prospectus. Other series, classes and
tranches of notes, including other
tranches of notes that are included in the
MBNAseries as a part of the Class C
notes, may be issued by the MBNA Credit
Card Master Note Trust in the future.
interest period. Each interest period will
begin on and include an interest payment
date and end on but exclude the next interest
payment date. However, the first interest
period will begin on and include July 1,
2004, which is the issuance date, and end on
but exclude August 16, 2004, which is the
first interest payment date for these Class
C(2004-2) notes.
The MBNAseries
Interest on these Class C(2004-2) notes for
any interest payment date will equal the
product of:
These Class C(2004-2) notes are expected to
be the twenty-first tranche of Class C notes
in the MBNAseries.
‰ the Class C(2004-2) note interest rate for
the applicable interest period; times
See “Annex I: Outstanding Series, Classes
and Tranches of Notes” for information on
the other outstanding notes issued by the
issuer. In addition, Annex I includes
information on the Class A(2004-6) notes,
which are expected to be issued by the
issuer.
‰ the actual number of days in the related
interest period divided by 360; times
‰ the outstanding dollar principal amount of
the Class C(2004-2) notes as of the
related record date.
The issuer will make interest payments on
these Class C(2004-2) notes on the 15th day
of each month, beginning in August 2004.
Interest payments due on a day that is not a
business day in New York, New York and
Newark, Delaware will be made on the
following business day.
Risk Factors
Investment in the Class C(2004-2) notes
involves risks. You should consider
carefully the risk factors beginning on page
S-14 in this prospectus supplement and
beginning on page 15 in the accompanying
prospectus.
The payment of interest on a senior class of
notes on any payment date is senior to the
payment of interest on subordinated classes
of notes of the MBNAseries on such date.
Generally, no payment of interest will be
made on any Class B note in the
MBNAseries until the required payment of
interest has been made to the Class A notes
in the MBNAseries. Similarly, generally, no
payment of interest will be made on any
Class C note in the MBNAseries until the
required payment of interest has been made
to the Class A notes and the Class B notes in
Interest
These Class C(2004-2) notes will accrue
interest at an annual rate equal to LIBOR
plus 0.90%, as determined on the related
LIBOR determination date.
Interest on these Class C(2004-2) notes will
begin to accrue on July 1, 2004 and will be
calculated on the basis of a 360-day year
and the actual number of days in the related
S-6
the MBNAseries. However, funds on
deposit in the Class C reserve account will
be available only to holders of Class C notes
to cover shortfalls of interest on any interest
payment date.
“—Events of Default” in the prospectus and
“The Notes—Early Redemption of the
Notes” in this prospectus supplement.
Principal
The issuer expects to pay the stated principal
amount of these Class C(2004-2) notes in
one payment on June 16, 2014, which is the
expected principal payment date, and is
obligated to do so if funds are available for
that purpose and not required for
subordination. If the stated principal amount
of these Class C(2004-2) notes is not paid in
full on the expected principal payment date
due to insufficient funds or insufficient
credit enhancement, noteholders will
generally not have any remedies against the
issuer until November 15, 2016, the legal
maturity date of these Class C(2004-2)
notes.
The initial nominal liquidation amount of
these Class C(2004-2) notes is $275,000,000.
Nominal Liquidation Amount
The nominal liquidation amount of a tranche
of notes corresponds to the portion of the
investor interest of the collateral certificate
that is allocable to support that tranche of
notes. If the nominal liquidation amount of
these Class C(2004-2) notes is reduced by:
‰ reallocations of available principal
amounts to pay interest on a senior class
of the MBNAseries or a portion of the
master trust II servicing fee allocable to
the MBNAseries; or
‰ charge-offs resulting from uncovered
defaults on the principal receivables in
master trust II allocable to the
MBNAseries,
If the stated principal amount of these
Class C(2004-2) notes is not paid in full on
the expected principal payment date, then an
early redemption event will occur with
respect to these Class C(2004-2) notes and,
subject to the principal payment rules
described below under “—Subordination;
Credit Enhancement” and “—Required
Subordinated Amount,” principal and
interest payments on these Class C(2004-2)
notes will be made monthly until they are
paid in full or until the legal maturity date
occurs, whichever is earlier.
the principal of and interest on these
Class C(2004-2) notes may not be paid in
full. If the nominal liquidation amount of
these Class C(2004-2) notes has been
reduced, available principal amounts and
available funds allocated to pay principal of
and interest on these Class C(2004-2) notes
will be reduced.
For a more detailed discussion of nominal
liquidation amount, see “The Notes—Stated
Principal Amount, Outstanding Dollar
Principal Amount and Nominal Liquidation
Amount” in the prospectus.
Principal of these Class C(2004-2) notes
may be paid earlier than the expected
principal payment date if any other early
redemption event or an event of default and
acceleration occurs with respect to these
Class C(2004-2) notes. See “The
Indenture—Early Redemption Events” and
Subordination; Credit Enhancement
These Class C(2004-2) notes generally will
not receive interest payments on any
S-7
payment date until the Class A notes and the
Class B notes have received their full
interest payments on such date. Available
principal amounts allocable to these
Class C(2004-2) notes may be applied to
make interest payments on the Class A notes
and Class B notes of the MBNAseries or to
pay a portion of the master trust II servicing
fee allocable to the MBNAseries. Available
principal amounts remaining on any
payment date after any reallocations for
interest on the senior classes of notes or for
a portion of the master trust II servicing fee
allocable to the MBNAseries will be first
applied to make targeted deposits to the
principal funding subaccounts of senior
classes of notes on such date before being
applied to make required deposits to the
principal funding subaccounts of the
subordinated notes on such date.
In addition, principal payments on these
Class C(2004-2) notes are subject to the
principal payment rules described below in
“—Required Subordinated Amount.”
No payment of principal will be made on
any Class B note in the MBNAseries unless,
following the payment, the remaining
available subordinated amount of Class B
notes in the MBNAseries is at least equal to
the required subordinated amount for the
outstanding Class A notes in the
MBNAseries less any usage of the required
subordinated amount of Class B notes for
such outstanding Class A notes. Similarly,
no payment of principal will be made on any
Class C note in the MBNAseries unless,
following the payment, the remaining
available subordinated amount of Class C
notes in the MBNAseries is at least equal to
the required subordinated amount for the
outstanding Class A notes and Class B notes
in the MBNAseries less any usage of the
required subordinated amount of Class C
notes for such outstanding Class A notes and
Class B notes. However, there are some
exceptions to this rule. See “The Notes—
Subordination of Interest and Principal” in
this prospectus supplement and in the
prospectus.
Required Subordinated Amount
Class C Reserve Account
In order to issue a senior class of notes, the
required subordinated amount of
subordinated notes must be outstanding and
available on the issuance date. Generally,
the required subordinated amount of a
subordinated class of notes for any date is an
amount equal to a stated percentage of the
adjusted outstanding dollar principal amount
of the senior tranche of notes for such date.
The issuer will establish a Class C reserve
subaccount to provide credit enhancement
solely for the holders of these Class
C(2004-2) notes. The Class C reserve
subaccount will initially not be funded. The
Class C reserve subaccount will not be
funded unless and until the three-month
average of the excess available funds
percentage falls below the levels described
in the following table or an early redemption
event or event of default occurs.
In addition, if the rating agencies consent
and without the consent of any noteholders,
the issuer may utilize forms of credit
enhancement other than subordinated notes
in order to provide senior classes of notes
with the required credit enhancement.
Funds on deposit in the Class C reserve
subaccount will be available to holders of
these Class C(2004-2) notes to cover
shortfalls of interest payable on interest
S-8
payment dates. Funds on deposit in the
Class C reserve subaccount will also be
available to holders of these Class
C(2004-2) notes to cover certain shortfalls
in principal. Only the holders of Class
C(2004-2) notes will have the benefit of this
Class C reserve subaccount. See “Deposit
and Application of Funds—Withdrawals
from the Class C Reserve Account.”
to the percentages specified in the table as
the three-month average of the excess
available funds percentage rises or falls. If
an early redemption event or event of
default occurs with respect to these Class
C(2004-2) notes, the targeted Class C
reserve subaccount amount will be the
aggregate adjusted outstanding dollar
principal amount of these Class C(2004-2)
notes. See “Deposit and Application of
Funds—Targeted Deposits to the Class C
Reserve Account.”
The following table indicates the amount
required to be on deposit in the Class C
reserve subaccount for these Class C(2004-2)
notes. For any month the amount targeted to
be on deposit is equal to the funding
percentage (which corresponds to the average
of the excess available funds percentage for
each of the preceding three consecutive
months as indicated in the following table)
times the sum of the initial dollar principal
amounts of all outstanding MBNAseries notes
times the nominal liquidation amount of these
Class C(2004-2) notes divided by the nominal
liquidation amount of all Class C notes in the
MBNAseries.
Three-month
average excess available
funds percentage
The early redemption events applicable to
all notes, including these Class C(2004-2)
notes, are described in the accompanying
prospectus. In addition, if for any date the
amount of excess available funds averaged
over the three preceding calendar months is
less than the required excess available funds
for such date, an early redemption event for
the Class C(2004-2) notes will occur. Excess
available funds for any month equals the
available funds allocated to the MBNAseries
that month after application for targeted
deposits to the interest funding account,
payment of the master trust II servicing fee
allocable to the MBNAseries, application to
cover defaults on principal receivables in
master trust II allocable to the MBNAseries
and reimbursement of any deficits in the
nominal liquidation amounts of notes.
Required excess available funds is an
amount equal to zero. This amount may be
changed provided the issuer (i) receives the
consent of the rating agencies and
(ii) reasonably believes that the change will
not have a material adverse effect on the
notes. See “The Notes—Early Redemption
of Notes” and “The Indenture—Early
Redemption Events” in the prospectus.
Funding
percentage
4.50% or greater
4.00% to 4.49%
3.50% to 3.99%
3.00% to 3.49%
2.50% to 2.99%
2.00% to 2.49%
1.99% or less
Early Redemption of Notes
0.00%
1.25%
2.00%
2.75%
3.50%
4.50%
6.00%
The excess available funds percentage for a
month is determined by subtracting the base
rate from the portfolio yield for that month.
See “Glossary of Defined Terms” for a
description of base rate and portfolio yield.
The amount targeted to be in the Class C
reserve subaccount will be adjusted monthly
S-9
Optional Redemption by the Issuer
The servicer has the right, but not the
obligation, to direct the issuer to redeem
these Class C(2004-2) notes in whole but
not in part on any day on or after the day on
which the nominal liquidation amount of
these Class C(2004-2) notes is reduced to
less than 5% of their highest outstanding
dollar principal amount. This repurchase
option is referred to as a clean-up call.
Indenture—Events of Default” in the
prospectus. For a description of the remedies
upon an event of default, see “The
Indenture—Events of Default Remedies” in
the prospectus and “Deposit and
Application of Funds—Sale of Credit Card
Receivables” in this prospectus supplement.
Master Trust II Assets and Receivables
The collateral certificate, which is the
issuer’s primary source of funds for the
payment of principal of and interest on these
Class C(2004-2) notes, is an investor
certificate issued by master trust II. The
collateral certificate represents an undivided
interest in the assets of master trust II.
Master trust II’s assets primarily include
credit card receivables from selected
MasterCard® and Visa® revolving credit
card accounts that meet the eligibility
criteria for inclusion in master trust II. These
eligibility criteria are discussed in the
prospectus under “Master Trust II—
Addition of Master Trust II Assets.”
The issuer will not redeem subordinated
notes if those notes are required to provide
credit enhancement for senior classes of
notes of the MBNAseries. If the issuer is
directed to redeem these Class C(2004-2)
notes, it will notify the registered holders at
least thirty days prior to the redemption
date. The redemption price of a note will
equal 100% of the outstanding principal
amount of that note, plus accrued but unpaid
interest on the note to but excluding the date
of redemption.
If the issuer is unable to pay the redemption
price in full on the redemption date, monthly
payments on these Class C(2004-2) notes
will thereafter be made, subject to the
principal payment rules described above
under “—Subordination; Credit
Enhancement,” until either the principal
of and accrued interest on these
Class C(2004-2) notes are paid in full or the
legal maturity date occurs, whichever is
earlier. Any funds in the principal funding
subaccount, the interest funding subaccount
and the Class C reserve subaccount for these
Class C(2004-2) notes will be applied to
make the principal and interest payments on
these notes on the redemption date.
The credit card receivables in master trust II
consist primarily of principal receivables
and finance charge receivables. Principal
receivables include amounts charged by
cardholders for merchandise and services
and amounts advanced to cardholders as
cash advances. Finance charge receivables
include periodic finance charges, annual
membership fees, cash advance fees, late
charges and certain other fees billed to
cardholders, and recoveries on receivables
in defaulted accounts.
In addition, MBNA is permitted to add to
master trust II participations representing
interests in a pool of assets primarily
consisting of receivables arising under
consumer revolving credit card accounts
owned by MBNA and collections thereon.
Events of Default
The Class C(2004-2) notes are subject to
certain events of default described in “The
S-10
See “The Master Trust II Portfolio” for
detailed financial information on the
receivables and the accounts.
Issuer Accounts
The issuer has established a principal
funding account, an interest funding
account, an accumulation reserve account
and a Class C reserve account for the benefit
of the MBNAseries. The principal funding
account, the interest funding account, the
accumulation reserve account and the Class
C reserve account will have subaccounts for
the Class C(2004-2) notes.
See “Annex II: Outstanding Master Trust II
Series” of this prospectus supplement for
additional information on the outstanding
series in master trust II.
Each month, distributions on the collateral
certificate will be deposited into the
collection account. Those deposits will then
be allocated to each series of notes, including
the MBNAseries. The amounts allocated to
the MBNAseries plus any other amounts to
be treated as available funds and available
principal amounts for the MBNAseries will
then be allocated to:
—the principal funding account;
—the interest funding account;
—the accumulation reserve account;
—the Class C reserve account;
—any other supplemental account;
—payments under any applicable
derivative agreements; and
—the other purposes as specified in this
prospectus supplement.
Funds on deposit in the principal funding
account and the interest funding account
will be used to make payments of principal
of and interest on the MBNAseries notes,
including the Class C(2004-2) notes.
Security for the Notes
The Class C(2004-2) notes are secured by a
shared security interest in:
• the collateral certificate;
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• the collection account;
However, following a sale of credit card
receivables (i) due to an insolvency of
MBNA, (ii) due to an event of default and
acceleration with respect to the Class
C(2004-2) notes or (iii) on the legal maturity
date for the Class C(2004-2) notes, as
described in “Deposit and Application of
Funds—Sale of Credit Card Receivables” in
this prospectus supplement and “Sources of
Funds to Pay the Notes—Sale of Credit
Card Receivables” in the prospectus, the
Class C(2004-2) noteholders have recourse
only to the proceeds of that sale.
• the applicable principal funding
subaccount;
• the applicable interest funding
subaccount;
• the applicable accumulation reserve
subaccount; and
• the applicable Class C reserve
subaccount.
However, the Class C(2004-2) notes are
entitled to the benefits of only that portion
of those assets allocated to them under the
indenture and the MBNAseries indenture
supplement.
Accumulation Reserve Account
The issuer will establish an accumulation
reserve subaccount to cover shortfalls in
investment earnings on amounts (other than
prefunded amounts) on deposit in the
principal funding subaccount for these Class
C(2004-2) notes.
See “The Notes—Sources of Funds to Pay
the Notes—The Collateral Certificate” and
“—The Issuer Accounts” in this prospectus
supplement and “Sources of Funds to Pay
the Notes—The Collateral Certificate” in
the prospectus.
The amount targeted to be deposited in the
accumulation reserve subaccount for these
Class C(2004-2) notes is zero, unless more
than one budgeted deposit is required to
accumulate and pay the principal of the
Class C(2004-2) notes on its expected
principal payment date, in which case, the
amount targeted to be deposited is 0.5% of
the outstanding dollar principal amount of
the Class C(2004-2) notes, or such other
amount designated by the issuer. See
“Deposit and Application of Funds—
Targeted Deposits to the Accumulation
Reserve Account.”
Limited Recourse to the Issuer
The sole sources of payment for principal of
or interest on these Class C(2004-2) notes
are provided by:
• the portion of the available principal
amounts and available funds allocated to
the MBNAseries and available to these
Class C(2004-2) notes after giving effect
to any reallocations, payments and
deposits for senior notes; and
• funds in the applicable issuer accounts for
these Class C(2004-2) notes.
Shared Excess Available Funds
Class C(2004-2) noteholders will have no
recourse to any other assets of the issuer or
any other person or entity for the payment of
principal of or interest on these Class
C(2004-2) notes.
The MBNAseries will be included in
“Group A.” In addition to the MBNAseries,
the issuer may issue other series of notes
that are included in Group A. As of the date
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of this prospectus supplement, the
MBNAseries is the only series of notes
issued by the issuer.
Ratings
The issuer will issue these Class C(2004-2)
notes only if they are rated at least “BBB” or
“Baa2” or its equivalent by at least one
nationally recognized rating agency.
To the extent that available funds allocated
to the MBNAseries are available after all
required applications of such amounts as
described in “Deposit and Application of
Funds—Application of MBNAseries
Available Funds,” these unused available
funds, called shared excess available funds,
will be applied to cover shortfalls in
available funds for other series of notes in
Group A. In addition, the MBNAseries may
receive the benefits of shared excess
available funds from other series in Group
A, to the extent available funds for such
other series of notes are not needed for such
series. See “Deposit and Application of
Funds—Shared Excess Available Funds” in
this prospectus supplement and “Sources of
Funds to Pay the Notes—The Collateral
Certificate” and “—Deposit and
Application of Funds” in the prospectus.
Other tranches of Class C notes may have
different rating requirements from the Class
C(2004-2) notes.
A rating addresses the likelihood of the
payment of interest on a note when due and
the ultimate payment of principal of that
note by its legal maturity date. A rating does
not address the likelihood of payment of
principal of a note on its expected principal
payment date. In addition, a rating does not
address the possibility of an early payment
or acceleration of a note, which could be
caused by an early redemption event or an
event of default. A rating is not a
recommendation to buy, sell or hold notes
and may be subject to revision or
withdrawal at any time by the assigning
rating agency. Each rating should be
evaluated independently of any other rating.
Stock Exchange Listing
The issuer will apply to list these Class
C(2004-2) notes on the Luxembourg Stock
Exchange. The issuer cannot guarantee that
the application for the listing will be
accepted or that, if accepted, such listing
will be maintained. You should consult with
Deutsche Bank Luxembourg S.A., the
Luxembourg listing agent for these
Class C(2004-2) notes, Boulevard Konrad
Adenauer 2, L-1115 Luxembourg, phone
number (352) 42 12 21, to determine
whether these Class C(2004-2) notes are
listed on the Luxembourg Stock Exchange.
See “Risk Factors—If the ratings of the
notes are lowered or withdrawn, their
market value could decrease” in the
prospectus.
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Risk Factors
The risk factors disclosed in this section and in “Risk Factors” in the accompanying
prospectus describe the principal risk factors of an investment in the Class C(2004-2) notes.
Only some of the assets of the issuer are available for
payments on any tranche of notes
The sole sources of payment of principal of and interest on your
tranche of notes are provided by:
‰ the portion of the available principal amounts and available
funds allocated to the MBNAseries and available to your tranche
of notes after giving effect to any reallocations and payments
and deposits for senior notes; and
‰ funds in the applicable issuer accounts for your tranche of notes.
As a result, you must rely only on the particular allocated assets
as security for your tranche of notes for repayment of the
principal of and interest on your notes. You will not have
recourse to any other assets of the issuer or any other person for
payment of your notes. See “The Notes—Sources of Funds to
Pay the Notes” in this prospectus supplement and “Sources of
Funds to Pay the Notes” in the accompanying prospectus.
In addition, if there is a sale of credit card receivables due to the
insolvency of MBNA, due to an event of default and
acceleration or on the applicable legal maturity date, as
described in “Deposit and Application of Funds—Sale of Credit
Card Receivables” in this prospectus supplement and “Sources
of Funds to Pay the Notes—Sale of Credit Card Receivables” in
the accompanying prospectus, your tranche of notes has
recourse only to the proceeds of that sale, any amounts then on
deposit in the issuer accounts allocated to and held for the
benefit of your tranche of notes and any amounts payable under
any applicable derivative agreement.
Class B notes and Class C notes are subordinated and bear
losses before Class A notes
Class B notes of the MBNAseries are subordinated in right of
payment of principal and interest to Class A notes, and Class C
notes of the MBNAseries are subordinated in right of payment
of principal and interest to Class A notes and Class B notes.
In the MBNAseries, available funds are first used to pay
interest due to Class A noteholders, next to pay interest due to
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Class B noteholders, and lastly to pay interest due to Class C
noteholders. If available funds are not sufficient to pay interest
on all classes of notes, the notes may not receive full payment of
interest if, in the case of Class A and Class B notes, reallocated
available principal amounts, and in the case of Class C notes,
amounts on deposit in the applicable Class C reserve
subaccount, are insufficient to cover the shortfall.
In the MBNAseries, available principal amounts may be
reallocated to pay interest on senior classes of notes of the
MBNAseries and to pay a portion of the master trust II servicing
fee allocable to the MBNAseries to the extent that available
funds are insufficient to make such payments. In addition,
charge-offs due to defaulted principal receivables in master trust
II allocable to the MBNAseries generally are reallocated from
the senior classes to the subordinated classes of the
MBNAseries. If these reallocations of available principal
amounts and charge-offs are not reimbursed from available
funds, the full stated principal amount of the subordinated
classes of notes will not be repaid. See “The Notes—Stated
Principal Amount, Outstanding Dollar Principal Amount and
Nominal Liquidation Amount—Nominal Liquidation Amount” in
the prospectus and “Deposit and Application of Funds—
Application of MBNAseries Available Principal Amounts” in
this prospectus supplement.
In addition, after application to pay interest on senior classes of
notes or to pay a portion of the master trust II servicing fee
allocable to the MBNAseries, available principal amounts are
first used to pay principal due to Class A noteholders, next to
pay principal due to Class B noteholders, and lastly to pay
principal due to Class C noteholders.
If there is a sale of the credit card receivables owned by master
trust II due to an insolvency of MBNA or due to an event of
default and acceleration with respect to the MBNAseries, the net
proceeds of the sale allocable to principal payments with respect
to the collateral certificate will generally be used first to pay
amounts due to Class A noteholders, next to pay amounts due to
Class B noteholders, and lastly, to pay amounts due to Class C
noteholders. This could cause a loss to Class A, Class B or Class
C noteholders if the amount available to them is not enough to
pay the Class A, Class B or Class C notes in full.
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Payment of Class B notes and Class C notes may be delayed or
reduced due to the subordination provisions
For the MBNAseries, subordinated notes, except as noted in the
following paragraph, will be paid principal only to the extent
that sufficient funds are available and such notes are not needed
to provide the required subordination for senior classes of notes
of the MBNAseries. In addition, available principal amounts
allocated to the MBNAseries will be applied first to pay
shortfalls in interest on senior classes of notes, then to pay a
portion of the shortfall in the master trust II servicing fee
allocable to the MBNAseries and then to make targeted deposits
to the principal funding subaccounts of senior classes of notes
before being applied to make required deposits to the principal
funding subaccounts of the subordinated notes.
If subordinated notes reach their expected principal payment
date, or an early redemption event, event of default and
acceleration or other optional or mandatory redemption occurs
with respect to such subordinated notes prior to the legal
maturity date, and cannot be paid because of the subordination
provisions of the MBNAseries indenture supplement,
prefunding of the principal funding subaccounts for the senior
notes of the MBNAseries will begin, as described in “Deposit
and Application of Funds—Targeted Deposits of MBNAseries
Available Principal Amounts to the Principal Funding
Account,” and no available principal amounts will be deposited
into the principal funding subaccount of, or used to make
principal payments on, the subordinated notes. After that time,
the subordinated notes will be paid only if, and to the extent
that:
• enough senior notes are repaid so that the subordinated notes are
no longer necessary to provide the required subordination;
• new subordinated notes are issued so that the subordinated notes
which are payable are no longer necessary to provide the
required subordination;
• the principal funding subaccounts for the senior notes are
prefunded so that the subordinated notes are no longer necessary
to provide the required subordination; or
• the subordinated notes reach their legal maturity date.
This may result in a delay or loss of principal payments to
holders of subordinated notes. See “Deposit and Application of
Funds—Targeted Deposits of MBNAseries Available Principal
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Amounts to the Principal Funding Account—Prefunding of the
Principal Funding Account for Senior Classes.”
Class A and Class B notes of the MBNAseries can lose their
subordination under some circumstances resulting in delayed
or reduced payments to you
Subordinated notes of the MBNAseries may have expected
principal payment dates and legal maturity dates earlier than
some or all of the notes of the senior classes.
If notes of a subordinated class reach their expected principal
payment date at a time when they are needed to provide the
required subordination for the senior classes of the MBNAseries
and the issuer is unable to issue additional notes of that
subordinated class or obtain acceptable alternative forms of
credit enhancement, prefunding of the senior classes will begin
and such subordinated notes will not be paid on their expected
principal payment date. The principal funding subaccounts for
the senior classes will be prefunded with available principal
amounts allocable to the MBNAseries and available for that
purpose in an amount necessary to permit the payment of those
subordinated notes while maintaining the required subordination
for the senior classes. See “Deposit and Application of
Funds—Targeted Deposits of MBNAseries Available Principal
Amounts to the Principal Funding Account.”
There will generally be a 29-month period between the expected
principal payment date and the legal maturity date of the
subordinated notes to prefund the principal funding subaccounts
of the senior classes, if necessary. Notes of a subordinated class
which have reached their expected principal payment date will
not be paid until the remaining subordinated notes provide the
required subordination for the senior notes, which payment may
be delayed further as other subordinated notes reach their
expected principal payment date. The subordinated notes will be
paid on their legal maturity date, to the extent that any funds are
available for that purpose from proceeds of the sale of
receivables or otherwise, whether or not the senior classes of
notes have been fully prefunded.
If the rate of repayment of principal receivables in master trust
II were to decline during this prefunding period, then the
principal funding subaccounts for the senior classes of notes
may not be fully prefunded before the legal maturity date of the
subordinated notes. In that event and only to the extent not
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fully prefunded, the senior classes would not have the required
subordination beginning on the legal maturity date of those
subordinated notes unless additional subordinated notes of that
class were issued or a sufficient amount of senior notes have
matured so that the remaining outstanding subordinated notes
provide the necessary subordination.
The table under “The Master Trust II Portfolio—Principal
Payment Rates” sets forth the highest and lowest cardholder
monthly principal payment rates for the master trust II portfolio
during the periods shown in such table. Principal payment rates
may change due to a variety of factors including economic,
social and legal factors, changes in the terms of credit card
accounts by MBNA or the addition of credit card accounts to
master trust II with different characteristics. There can be no
assurance that the rate of principal repayment will remain in this
range in the future.
Yield and payments on the receivables could decrease resulting
in the receipt of principal payments earlier than the expected
principal payment date
There is no assurance that the stated principal amount of your
notes will be paid on its expected principal payment date.
A significant decrease in the amount of credit card receivables
in master trust II for any reason could result in an early
redemption event and in early payment of your notes, as well as
decreased protection to you against defaults on the credit card
receivables. In addition, the effective yield on the credit card
receivables owned by master trust II could decrease due to,
among other things, a change in periodic finance charges on the
credit card accounts, an increase in the level of delinquencies or
increased convenience use of the card whereby cardholders pay
their credit card balance in full each month and incur no finance
charges. This could reduce the amount of available funds. If the
amount of excess available funds for any three consecutive
calendar months is less than the required excess available funds
for such three months, an early redemption event will occur and
could result in an early payment of your notes. See “Prospectus
Supplement Summary—Early Redemption of Notes.”
See “Risk Factors” in the prospectus for a discussion of other
circumstances under which you may receive principal payments
earlier or later than the expected principal payment date.
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Glossary
This prospectus supplement and the accompanying prospectus use defined terms. You
can find a listing of defined terms in the “Glossary of Defined Terms” beginning on page S-62
in this prospectus supplement and beginning on page 108 in the accompanying prospectus.
The Notes
The MBNAseries notes will be issued pursuant to the indenture and an indenture
supplement. The following discussion and the discussion under “The Notes” and “The
Indenture” in the prospectus summarize the material terms of the notes, the indenture and the
MBNAseries indenture supplement. These summaries do not purport to be complete and are
qualified in their entirety by reference to the provisions of the notes, the indenture and the
MBNAseries indenture supplement. Neither the indenture nor the MBNAseries indenture
supplement limits the aggregate principal amount of notes that may be issued.
The MBNAseries will be included in Excess Available Funds Group A for the purpose of
sharing excess available funds. The MBNAseries notes will be issued in classes. Each class of
notes may have multiple tranches which may be issued at different times and have different
terms. Whenever a “class” of notes is referred to in this prospectus supplement or the
accompanying prospectus, it includes all tranches of that class of notes, unless the context
otherwise requires.
No senior class of the MBNAseries may be issued unless a sufficient amount of
subordinated notes or other acceptable credit enhancement has previously been issued and is
outstanding. See “—Issuances of New Series, Classes and Tranches of Notes—Required
Subordinated Amount.”
The issuer will pay principal of and interest on the Class C(2004-2) notes solely from the
portion of MBNAseries Available Funds and MBNAseries Available Principal Amounts and
from other amounts which are available to the Class C(2004-2) notes under the indenture and
the MBNAseries indenture supplement after giving effect to all allocations and reallocations.
If those sources are not sufficient to pay the Class C(2004-2) notes, Class C(2004-2)
noteholders will have no recourse to any other assets of the issuer or any other person or entity
for the payment of principal of or interest on those notes.
Subordination of Interest and Principal
Principal and interest payments on Class B notes and Class C notes of the MBNAseries
are subordinated to payments on Class A notes of the MBNAseries. Subordination of Class B
notes and Class C notes of the MBNAseries provides credit enhancement for Class A notes of
the MBNAseries.
Principal and interest payments on Class C notes of the MBNAseries are subordinated to
payments on Class A notes and Class B notes of the MBNAseries. Subordination of Class C
notes of the MBNAseries provides credit enhancement for Class A notes and Class B notes of
the MBNAseries.
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In addition, in the case of a discount note, the accreted principal of that note
corresponding to capitalized interest will be senior or subordinated to the same extent that
principal is senior or subordinated.
MBNAseries Available Principal Amounts may be reallocated to pay interest on senior
classes of notes or to pay a portion of the master trust II servicing fee allocable to the
MBNAseries, subject to certain limitations. In addition, charge-offs due to uncovered defaults
on principal receivables in master trust II allocable to the MBNAseries generally are
reallocated from the senior classes to the subordinated classes of the MBNAseries. See “The
Notes—Stated Principal Amount, Outstanding Dollar Principal Amount and Nominal
Liquidation Amount—Nominal Liquidation Amount” and “Master Trust II—Defaulted
Receivables; Rebates and Fraudulent Charges” in the prospectus.
In the MBNAseries, payment of principal may be made on a subordinated class of notes
before payment in full of each senior class of notes only under the following circumstances:
‰ If after giving effect to the proposed principal payment there is still a sufficient amount
of subordinated notes to support the outstanding senior notes. See “Deposit and
Application of Funds—Targeted Deposits of MBNAseries Available Principal Amounts
to the Principal Funding Account” and “—Allocation to Principal Funding
Subaccounts.” For example, if a tranche of Class A notes has been repaid, this
generally means that, unless other Class A notes are issued, at least some Class B notes
and Class C notes may be repaid when such Class B notes and Class C notes are
required to be repaid even if other tranches of Class A notes are outstanding.
‰ If the principal funding subaccounts for the senior classes of notes have been
sufficiently prefunded as described in “Deposit and Application of Funds—Targeted
Deposits of MBNAseries Available Principal Amounts to the Principal Funding
Account—Prefunding of the Principal Funding Account for Senior Classes.”
‰ If new tranches of subordinated notes are issued so that the subordinated notes that
have reached their expected principal payment date are no longer necessary to provide
the required subordination.
‰ If the subordinated tranche of notes reaches its legal maturity date and there is a sale of
credit card receivables as described in “Deposit and Application of Funds—Sale of
Credit Card Receivables.”
MBNAseries Available Principal Amounts remaining after any reallocations for interest
on the senior notes or for a portion of the master trust II servicing fee allocable to the
MBNAseries will be applied to make targeted deposits to the principal funding subaccounts of
senior notes before being applied to make targeted deposits to the principal funding
subaccounts of the subordinated notes if such remaining amounts are not sufficient to make all
required targeted deposits.
Issuances of New Series, Classes and Tranches of Notes
Conditions to Issuance
The issuer may issue new series, classes and tranches of notes (including additional notes
of an outstanding tranche or class), so long as the conditions to issuance listed in “The
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Notes—Issuances of New Series, Classes and Tranches of Notes” in the prospectus are
satisfied and so long as any increase in the targeted deposit amount of any Class C reserve
subaccount caused by such issuance will have been funded on or prior to such issuance date.
The issuer and the indenture trustee are not required to obtain the consent of any
noteholder of any outstanding series, class or tranche to issue any additional notes.
Required Subordinated Amount
No Class A notes or Class B notes may be issued unless the required subordinated
amount is available at the time of its issuance. The required subordinated amount of a tranche
of a senior class of notes of the MBNAseries is the aggregate nominal liquidation amount of a
subordinated class that is required to be outstanding and available on the date when a tranche
of a senior class of notes is issued.
The issuer may change the required subordinated amount for any tranche of notes of the
MBNAseries, or the method of computing the required subordinated amount, at any time
without the consent of any noteholders so long as the issuer has:
‰ received confirmation from each rating agency that has rated any outstanding notes
that the change will not result in the reduction, qualification or withdrawal of its thencurrent rating of any outstanding notes in the MBNAseries;
‰ delivered an opinion of counsel that for federal income tax purposes (1) the change
will not adversely affect the tax characterization as debt of any outstanding series or
class of investor certificates issued by master trust II that were characterized as debt at
the time of their issuance, (2) following the change, master trust II will not be treated
as an association, or a publicly traded partnership, taxable as a corporation, and (3)
such change will not cause or constitute an event in which gain or loss would be
recognized by any holder of an investor certificate issued by master trust II; and
‰ delivered an opinion of counsel that for federal income tax purposes (1) the change
will not adversely affect the tax characterization as debt of any outstanding series, class
or tranche of notes of the issuer that were characterized as debt at the time of their
issuance, (2) following the change, the issuer will not be treated as an association, or
publicly traded partnership, taxable as a corporation, and (3) such change will not
cause or constitute an event in which gain or loss would be recognized by any holder
of such notes.
In order to issue Class A notes, the issuer must calculate the available amount of Class B
notes and Class C notes. The issuer will first calculate the amount of Class B notes available
for such new tranche of Class A notes. This is done by computing the following:
‰ the aggregate nominal liquidation amount of all tranches of outstanding Class B notes
on that date, after giving effect to any issuances, deposits, allocations, reallocations or
payments with respect to Class B notes to be made on that date; minus
‰ the aggregate amount of the Class A required subordinated amount of Class B notes for
all other Class A notes which are outstanding on that date, after giving effect to any
issuances, deposits, allocations, reallocations or payments with respect to Class A
notes to be made on that date.
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The calculation in the prior paragraph will also be made in the same manner for
calculating the amount of Class C notes available for Class A notes.
Additionally, in order to issue Class A notes, the issuer must calculate the amount of
Class C notes available for Class B notes. This is done by computing the following:
• the aggregate nominal liquidation amount of all tranches of outstanding Class C notes
on that date, after giving effect to any issuances, deposits, allocations, reallocations or
payments with respect to Class C notes to be made on that date; minus
• the aggregate amount of the Class A required subordinated amount of Class C notes
for all tranches of Class A notes for which the Class A required subordinated amount
of Class B notes is equal to zero which are outstanding on that date, after giving effect
to any issuances, deposits, allocations, reallocations or payments with respect to Class
A notes to be made on that date.
In order to issue Class B notes, the issuer must calculate the available amount of Class C
notes. This is done by computing the following:
‰ the aggregate nominal liquidation amount of all tranches of Class C notes which are
outstanding on that date, after giving effect to any issuances, deposits, allocations,
reallocations or payments with respect to Class C notes to be made on that date; minus
‰ the sum of:
—the aggregate amount of the Class B required subordinated amount of Class C notes
for all other tranches of Class B notes which are outstanding on that date, after
giving effect to any issuances, deposits, allocations, reallocations or payments with
respect to any MBNAseries notes to be made on that date; plus
—the aggregate amount of the Class A required subordinated amount of Class C notes
for all tranches of Class A notes for which the Class A required subordinated
amount of Class B notes is equal to zero which are outstanding on that date, after
giving effect to any issuances, deposits, allocations, reallocations or payments with
respect to those Class A notes to be made on that date.
Waiver of Issuance Conditions
If the issuer obtains confirmation from each rating agency that has rated any outstanding
notes that the issuance of a new series, class or tranche of notes will not cause a reduction,
qualification or withdrawal of the ratings of any outstanding notes rated by that rating agency,
then some of the conditions to issuance described above and under “The Notes—Issuances of
New Series, Classes and Tranches of Notes” in the prospectus may be waived.
Sources of Funds to Pay the Notes
The Collateral Certificate
The primary source of funds for the payment of principal of and interest on the notes is
the collateral certificate issued by master trust II to the issuer. For a description of the
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collateral certificate, master trust II and its assets, see “Master Trust II” and “Sources of
Funds to Pay the Notes—The Collateral Certificate” in the prospectus.
Payments Received from Derivative Counterparties
The issuer may enter into derivative agreements with respect to certain tranches of the
MBNAseries as a source of funds to pay principal of or interest on the notes. See “Deposit
and Application of Funds—Payments Received from Derivative Counterparties for Interest on
Foreign Currency Notes” and “—Payments Received from Derivative Counterparties for
Principal.” The issuer has not entered into such a derivative agreement for the Class
C(2004-2) notes.
The Issuer Accounts
The issuer will establish a principal funding account, an interest funding account and an
accumulation reserve account for the benefit of the MBNAseries, which will have subaccounts
for each tranche of notes of the MBNAseries, and a Class C reserve account, which will have
subaccounts for each tranche of Class C notes of the MBNAseries.
Each month, distributions on the collateral certificate will be deposited into the collection
account, and then allocated to each series of notes (including the MBNAseries) as described in
the accompanying prospectus, and then allocated to the principal funding account, the interest
funding account, the accumulation reserve account, the Class C reserve account and any other
supplemental account, to make payments under any applicable derivative agreements and
additionally as specified in “Deposit and Application of Funds.”
Funds on deposit in the principal funding account and the interest funding account will be
used to make payments of principal of and interest on the MBNAseries notes when such
payments are due. Payments of interest and principal will be due in the month when the funds
are deposited into the accounts, or in later months. If interest on a note is not scheduled to be
paid every month—for example, if interest on that note is payable quarterly, semiannually or
at another interval less frequently than monthly—the issuer will deposit accrued interest
amounts funded from MBNAseries Available Funds into the interest funding subaccount for
that note to be held until the interest is due. See “Deposit and Application of Funds—Targeted
Deposits of MBNAseries Available Funds to the Interest Funding Account.”
If the issuer anticipates that MBNAseries Available Principal Amounts will not be
enough to pay the stated principal amount of a note on its expected principal payment date, the
issuer may begin to apply MBNAseries Available Principal Amounts in months before the
expected principal payment date and deposit those funds into the principal funding subaccount
established for that tranche to be held until the expected principal payment date of that note.
However, since funds in the principal funding subaccount for tranches of subordinated notes
will not be available for credit enhancement for any senior classes of notes, MBNAseries
Available Principal Amounts will not be deposited into the principal funding subaccount for a
tranche of subordinated notes if such deposit would reduce the available subordination below
the required subordination.
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If the earnings on funds in the principal funding subaccount are less than the interest
payable on the portion of principal in the principal funding subaccount for the applicable
tranche of notes, the amount of such shortfall will be withdrawn from the accumulation
reserve account to the extent available, unless the amounts on deposit in the principal funding
subaccount are prefunded amounts, in which case additional finance charge collections will be
allocable to the collateral certificate and the MBNAseries and will be treated as MBNAseries
Available Funds as described under “Deposit and Application of Funds—MBNAseries
Available Funds” in this prospectus supplement and “Master Trust II—Application of
Collections” in the prospectus.
Limited Recourse to the Issuer; Security for the Notes
The collateral certificate is allocated a portion of collections of finance charge
receivables, collections of principal receivables, its share of the payment obligation on the
master trust II servicing fee and its share of defaults on principal receivables in master trust II
based on the investor percentage. The MBNAseries and the other series of notes are secured
by a shared security interest in the collateral certificate and the collection account of the
issuer, but each series of notes (including the MBNAseries) is entitled to the benefits of only
that portion of those assets allocable to it under the indenture and the applicable indenture
supplement. Therefore, only a portion of the collections allocated to the collateral certificate
are available to the MBNAseries. Similarly, MBNAseries notes are entitled only to their
allocable share of MBNAseries Available Funds, MBNAseries Available Principal Amounts,
amounts on deposit in the applicable issuer accounts, any payments received from derivative
counterparties (to the extent not included in MBNAseries Available Funds) and proceeds of
the sale of credit card receivables by master trust II. Noteholders will have no recourse to any
other assets of the issuer or any other person or entity for the payment of principal of or
interest on the notes.
Each tranche of notes of the MBNAseries is entitled to the benefits of only that portion of
the issuer’s assets allocated to that tranche under the indenture and the MBNAseries indenture
supplement. Each tranche of notes is also secured by a security interest in the applicable
principal funding subaccount, the applicable interest funding subaccount, the applicable
accumulation reserve subaccount, in the case of a tranche of Class C notes, the applicable
Class C reserve subaccount and any other applicable supplemental account, and by a security
interest in any applicable derivative agreement.
Early Redemption of the Notes
The early redemption events applicable to all notes are described in “The Indenture—
Early Redemption Events” in the prospectus. In addition, if for any date the amount of Excess
Available Funds averaged over the three preceding months is less than the Required Excess
Available Funds for such date, an early redemption event for the Class C(2004-2) notes will
occur.
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Deposit and Application of Funds
The indenture specifies how Available Funds (primarily consisting of collections of
