Press Release

DBRS Morningstar Maintains Ratings on NewDay Funding and NewDay Partnership Funding Notes Under Review with Negative Implications

Consumer Loans & Credit Cards

August 28, 2020

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

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 Funding 2017-1 plc:
-- 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)

In each transaction, the ratings address the timely payment of scheduled interest and ultimate repayment of principal by the legal maturity date. DBRS Morningstar also rates several Class A Notes of these Issuers at AAA (sf), which were not placed UR-Neg. For more information, please refer to www.dbrsmorningstar.com.

These notes are part of the master issuance structure of Newday Funding and Newday Partnership, 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.

On 28 May 2020, DBRS Morningstar placed the ratings on the notes UR-Neg. in order to assess if the transactions’ performance trend could be sustainable amid the Coronavirus Disease (COVID-19) environment. For information on this rating action, please refer to the following press release: https://www.dbrsmorningstar.com/research/361710/dbrs-morningstar-places-newday-funding-and-newday-partnership-funding-notes-under-review-with-negative-implications.

KEY RATING DRIVERS AND CONSIDERATIONS
Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. The ratings were placed UR-Neg. on 28 May 2020 and DBRS Morningstar has extended the UR-Neg. status beyond the 90-day period to keep monitoring the transactions’ performance given the current negative economic environment due to the coronavirus pandemic.

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, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 22 July 2020. For details see the following commentaries: https://www.dbrsmorningstar.com/research/364318/global-macroeconomic-scenarios-july-update
and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The UR-Neg. 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 macroeconomic scenario discussed in the commentaries 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.

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.

For more information regarding rating methodologies and Coronavirus Disease (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 Coronavirus Disease (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 transactions 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.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

An asset and a cash flow analysis were both conducted.

Other methodologies referenced in these transactions 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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/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 ratings 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 these transactions took place on 28 May 2020, when the ratings listed above were placed UR-Neg.

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

This rating is Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. If heightened market uncertainty and volatility persists, DBRS Morningstar may extend the Under Review status for a longer period of time. As this is an Under Review Rating Action, a 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: 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
20 Fenchurch Street, 31st Floor,
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 these transactions 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 this credit 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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