DBRS Morningstar Confirms Ratings on NewDay Partnership Funding plc
Consumer Loans & Credit CardsDBRS Ratings Limited (DBRS Morningstar) confirmed its ratings of the notes issued by NewDay Partnership Funding 2017-1 plc (NewDay Partnership 2017-1), NewDay Partnership Funding Loan Note Issuer VFN-P1 V1 (Sub Series V1) and NewDay Partnership Funding Loan Note Issuer VFN-P1 V2 (Sub Series V2), as follows:
NewDay Partnership 2017-1:
-- AAA (sf) on the Class A Notes
-- AAA (sf) on the Class B Notes
-- AA (high) (sf) on the Class C Notes
-- A (sf) on the Class D Notes
-- BBB (sf) on the Class E Notes
-- B (sf) on the Class F Notes
Sub Series V1:
-- A (sf) on the Class A Loan Note
-- BB (sf) to the Class E Loan Note
-- B (sf) to the Class F Loan Note
Sub Series V2:
-- AAA (sf) on the Class A Loan Note
-- AAA (sf) on the Class B Loan Note
-- AA (high) (sf) on the Class C Loan Note
-- A (sf) on the Class D Loan Note
-- BB (sf) on the Class E Loan Note
-- B (sf) on the Class F Loan Note
The ratings of the Class A Notes address the timely payment of interest and the ultimate payment of principal by the final maturity date. The ratings of the other classes of the notes address the ultimate payment of interest and principal by the final maturity date.
The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and charge-offs, as of September 2019.
-- Portfolio Monthly Principal Payment Rate (MPPR), Charge-Off Rate and Yield Rate assumptions.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.
-- No early termination events have occurred.
The series are part of a master issuance structure where all series of notes are supported by the same pool of co-branded high street retailer credit card, store card receivables and instalment credit loans originated by NewDay Ltd, the Originator, in the United Kingdom. The portfolio is serviced by NewDay Cards Ltd. All series are currently in their respective revolving periods.
PORTFOLIO PERFORMANCE AND ASSUMPTIONS
As of the September 2019 payment date, receivables more than 90 days delinquent represented 1.0% of the outstanding balance, unchanged from September 2018. The portfolio yield and MPPR were 23.2% and 25.9%, respectively. The annualised charge-off rate was 4.5%. DBRS Morningstar maintained its MPPR, portfolio yield and charge-off rate assumptions at 20.5%, 19.0% and 5.0%, respectively.
CREDIT ENHANCEMENT
Credit enhancement is provided by subordination of the junior notes and has remained stable as all the series are currently in their respective revolving periods. There are also series-specific liquidity reserve funds that cover shortfalls in senior fees and interest on the notes.
Citibank N.A./London Branch acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of Citibank N.A./London Branch, the downgrade provisions outlined in the transaction documents and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in Da Vinci, DBRS Morningstar’s proprietary cash flow engine.
Notes:
All figures are in British pound sterling unless otherwise noted.
The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”. DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include investor reports provided by NewDay Ltd.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating actions on this transaction took place on 17 October 2018, when DBRS Morningstar confirmed its ratings of the notes for each series.
The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.
Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies is available at www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered stress scenarios, as compared to the parameters used to determine the rating (the Base Case). The base case assumptions for the Charge-Off Rate is 5.0%, the MPPR is 20.5%, and the Yield Rate is 19.0%.
The following four stress scenarios were applied:
Scenario 1: A 25% decrease in the base case MPPR.
Scenario 2: A 25% increase in the base case Charge-Off Rate.
Scenario 3: A 25% decrease in the base case Yield Rate.
Scenario 4: A 15% increase in the base case Charge-Off Rate, 15% decrease in the base case MPPR and 15% decrease in the base case Yield Rate.
The expected ratings for the notes under each stress scenario are:
NewDay Partnership 2017-1
Class A Notes: AAA (sf), AAA (sf), AAA (sf), AAA (sf)
Class B Notes: AAA (sf), AAA (sf), AAA (sf), AAA (sf)
Class C Notes: A (high) (sf), AA (high) (sf), AA (high) (sf), AA (sf)
Class D Notes: A (low) (sf), A (sf), A (sf), A (sf)
Class E Notes: BBB (low) (sf), BBB (low) (sf), BBB (low) (sf), BB (high) (sf)
Class F Notes: B (sf), B (sf), below B (sf), B (sf)
Sub Series V1
Class A Notes: BBB (high) (sf), A (sf), A (sf), A (low) (sf)
Class E Notes: BB (sf), BB (sf), BB (sf), BB (sf)
Class F Notes: B (sf), B (sf), B (sf), B (sf)
Sub Series V2
Class A Notes: AAA (sf), AAA (sf), AAA (sf), AAA (sf)
Class B Notes: AAA (sf), AAA (sf), AAA (sf), AAA (sf)
Class C Notes: AA (sf), AA (sf), AA (high) (sf), AA (high) (sf)
Class D Notes: BBB (high) (sf), A (sf), A (sf), A (low) (sf)
Class E Notes: BB (sf), BB (sf), BB (sf), BB (sf)
Class F Notes: B (sf), B (sf), B (sf), B (sf)
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
NewDay Partnership 2017-1: 29 September 2017
Sub Series V1: 15 December 2017
Sub Series V2: 15 December 2017
DBRS Ratings Limited
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Registered and incorporated under the laws of England and Wales: Company No. 7139960.
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.
ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.