Press Release

DBRS Morningstar Places NewDay Funding and NewDay Partnership Funding Notes Under Review with Negative Implications

Consumer Loans & Credit Cards

May 28, 2020

DBRS Ratings Limited (DBRS Morningstar) placed its ratings of the following notes issued by the NewDay Funding and NewDay Partnership Funding related transactions Under Review with Negative Implications:

NewDay Funding 2017-1 Plc:
-- Class B Notes rated AA (high) (sf)
-- Class C Notes rated A (high) (sf)
-- Class D Notes rated BBB (sf)
-- Class E Notes rated BB (sf)
-- Class F Notes rated B (high) (sf)

NewDay Funding 2018-1 Plc:
-- Class B Notes rated AA (high) (sf)
-- Class C Notes rated A (high) (sf)
-- Class D Notes rated BBB (low) (sf)
-- Class E Notes rated BB (low) (sf)
-- Class F Notes rated B (high) (sf)

NewDay Funding 2018-2 Plc:
-- Class B Notes rated AA (high) (sf)
-- Class C Notes rated A (sf)
-- Class D Notes rated BBB (sf)
-- Class E Notes rated BB (low) (sf)
-- Class F Notes rated B (high) (sf)

NewDay Funding 2019-1 Plc:
-- Class B Notes rated AA (high) (sf)
-- Class C Notes rated A (sf)
-- Class D Notes rated BBB (sf)
-- Class E Notes rated BB (sf)
-- Class F Notes rated B (high) (sf)

NewDay Funding 2019-2 Plc:
-- Class B Notes rated AA (high) (sf)
-- Class C Notes rated A (sf)
-- Class D Notes rated BBB (low) (sf)
-- Class E Notes rated BB (sf)
-- Class F Notes rated B (high) (sf)

NewDay Funding Loan Note Issuer VFN-F1 V1:
-- Class A Notes rated BBB (low) (sf)
-- Class E Notes rated BB (low) (sf)
-- Class F Notes rated B (high) (sf)

NewDay Funding Loan Note Issuer VFN-F1 V2:
-- Class B Notes rated AA (high) (sf)
-- Class C Notes rated A (high) (sf)
-- Class D Notes rated BBB (low) (sf)
-- Class E Notes rated BB (low) (sf)
-- Class F Notes rated B (high) (sf)

NewDay Partnership 2017-1:
-- Class B Notes rated AAA (sf)
-- Class C Notes rated AA (high) (sf)
-- Class D Notes rated A (sf)
-- Class E Notes rated BBB (sf)
-- Class F Notes rated B (sf)

NewDay Partnership Funding Loan Note Issuer VFN-P1 V1:
-- Class A Loan Note rated A (sf)
-- Class E Loan Note rated BB (sf)
-- Class F Loan Note rated B (sf)

NewDay Partnership Funding Loan Note Issuer VFN-P1 V2:
-- Class B Loan Note rated AAA (sf)
-- Class C Loan Note rated AA (high) (sf)
-- Class D Loan Note rated A (sf)
-- Class E Loan Note rated BB (sf)
-- Class F Loan Note rated B (sf)

DBRS Morningstar also rates several Class A Notes of these Issuers at AAA (sf), which are not placed Under Review with Negative Implications. For more information please refer to www.dbrsmorningstar.com.

These notes are part of the master issuance structure of Newday Funding and Newday Partnership, respectively, where all series of notes are supported by the same pool of receivables and generally issued under the same requirements regarding servicing, amortisation events, priority of distributions, and eligible investments.

KEY RATING DRIVERS AND CONSIDERATIONS
On 8 May 2020, DBRS Morningstar released its commentary “European ABS Transactions’ Risk Exposure to Coronavirus (COVID-19) Effect” (https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect) where DBRS Morningstar discussed the overall risk exposure of the credit card sector to the coronavirus and provided a framework for identifying the transactions that are more at risk and likely to be affected by the fallout of the pandemic on the economy. Considering the framework, the Under Review with Negative Implications status on the notes issued by the NewDay Funding and NewDay Partnership Funding transactions listed above are driven by the collateral performance of each portfolio to date, as well as DBRS Morningstar’s consideration that unemployment levels contemplated in the moderate scenario of the DBRS Morningstar commentary published on 16 April 2020 (https://www.dbrsmorningstar.com/research/359679/global-macroeconomic-scenarios-implications-for-credit-ratings) could result in higher delinquencies, ultimately higher charge-off rates and lower paid portfolio yield. The ratings of the notes listed above could be negatively affected by higher expected charge-off rates and/or lower yield assumptions.

DBRS Morningstar will consider the reported latest performance the NewDay Funding and NewDay Partnership Funding transactions to assess the medium- to long-term effects of the coronavirus pandemic. Additionally, DBRS Morningstar will consider the macroeconomic developments relative to the outbreak of the pandemic, including the duration and severity of the crisis on the UK economy.

DBRS Morningstar typically endeavours to resolve the status of ratings Under Review with Negative Implications as soon as appropriate. If heightened market uncertainty and volatility persists, DBRS Morningstar may extend the Under Review status for a longer period of time.

On 16 April 2020 and 22 April 2020, respectively, DBRS Morningstar published its outlook on the impact to key economic indicators for the 2020-22 time frame and its impact on structured finance ratings. For details see the following commentaries: https://www.dbrsmorningstar.com/research/359679/global-macroeconomic-scenarios-implications-for-credit-ratings and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings.

For more information regarding rating methodologies and COVID-19, please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and COVID-19, please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (22 April 2020).

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

DBRS Morningstar is undertaking a review and will remove the ratings from this status as soon as it is appropriate.

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found at: http://www.dbrsmorningstar.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.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports and historical performance data provided by NewDay Limited.

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 one or more 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 the NewDay Funding transactions took place on 11 June 2019 (with the exception of Series 2019-2) when DBRS Morningstar finalised its provisional ratings on the Series 2019-1 Class A, Class B, Class C, Class D, Class E and Class F Notes, and confirmed its ratings of the notes of other related outstanding series. The last rating action on New Day Funding 2019-2 took place on 19 September 2019 when DBRS Morningstar finalised its provisional ratings on the Class A, Class B, Class C, Class D, Class E and Class F Notes. The last rating action on the NewDay Partnership Funding transactions took place on 17 October 2019 when DBRS Morningstar confirmed its ratings on the 2017-1, VFN-P1 V1 and VFN-P1 V2 series.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

Ratings are Under Review with the Negative Implications designation. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. If continued heightened market uncertainty and volatility persists, DBRS Morningstar may extend the Under Review status for a longer period of time. Sensitivity analysis is not applicable.

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 U.S. regulations only.

Lead Analyst: Jeffrey Cespon, Senior Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director

Initial Rating Dates:
NewDay Funding: 16 June 2017 for Series 2017-1; 20 June 2018 for Series 2018-1; 22 October 2018 for Series 2018-2; 28 May 2019 for Series 2019-1; 9 September 2019 for Series 2019-2; 15 December 2017 for Loan Note Issuer VFN-F1 V1 and Loan Note Issuer VFN-F1 V2.
NewDay Partnership Funding: 29 September 2017 for Series 2017-1; 15 December 2017 for Loan Note Issuer VFN-P1 V1; 15 December 2017 for Loan Note Issuer VFN-P1 V2.

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
Tel. +44 (0) 20 7855 6600
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.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375

For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.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.

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