DBRS Confirms Rating on Securitisation of Catalogue Assets Limited

DBRS Ratings Limited (DBRS) has today confirmed the rating of A (sf) on Class A VFN (the Notes) of Securitisation of Catalogue Assets Limited.

The Notes are backed by a pool of home shopping receivables originated by Shop Direct Finance Company Limited in the United Kingdom. The receivables securitised consist of home shopping receivables granted to private individuals. The transaction will be allowed to revolve until December 2016, subject to some performance conditions being met.

Confirmation of the ratings on the Notes is based upon the following analytical considerations:

-- Portfolio performance, in terms of level of charge-off, payment rate and cash yield rate as of October 2014 payment date.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- Current available credit enhancement to the Notes to cover expected losses assumed in line with an A (sf) rating level.

The current level of charge-off rate, yield and payment rate are stable. As of the recent reporting date and since October 2011, the charge-off rate weighted average has been 13.56%, while the cash yield rate weighted average has been 15.92%. The payment rate is currently 10.83%.

Credit enhancement for the Notes is provided by subordinated Class B VFN and overcollaterisation. Current credit enhancement for the Notes is 28.00%.

The Royal Bank of Scotland plc (rated BBB (high) with a Negative trend by DBRS) is the account bank for the transaction. The DBRS rating of The Royal Bank of Scotland plc complies with the DBRS “Legal Criteria for European Structured Finance Transactions,” given the rating of the Notes.

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

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release and can be found at http://www.dbrs.com/about/methodologies.

For a more detailed discussion of sovereign risk impact on structured finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” at http://www.dbrs.com/research/239786/the-effect-of-sovereign-risk-on-securitisations-in-the-euro-area.pdf.

The sources of information used for this rating include investor reports provided by HSBC Bank plc (the Conduit Adviser Manager). DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 25 November 2013, when DBRS assigned the new rating of A (sf) to the Class A VFN.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the base case):

• Charge-Off Rate Used: Charge-off Rate of 19.00%, a 25% and 50% increase on the base case;
• Payment Rate Used: Base case Payment Rate of 7.50%, a 25% and 50% increase of the base case;
• Cash Yield Used: Cash Yield of 11.50%, a 25% and 50% increase on the base case.

Class A VFN Risk Sensitivity:
• A hypothetical increase of the base case Charge-Off Rate by 25%, ceteris paribus, would lead to a downgrade of the Class A VFN to BBB (sf);
• A hypothetical increase of the base case Charge-Off Rate by 50%, ceteris paribus, would lead to a downgrade of the Class AVFN to BBB (sf);
• A hypothetical decrease of the base case Payment Rate by 25%, ceteris paribus, would lead to a downgrade of the Class A VFN to BBB (sf);
• A hypothetical decrease of the base case Payment Rate by 50%, ceteris paribus, would lead to a downgrade of the Class A VFN to BB (sf);
• A hypothetical decrease of the base case Cash Yield by 25%, ceteris paribus, would lead to a downgrade of the Class A VFN to BBB (sf);
• A hypothetical decrease of the base case Cash Yield by 50%, ceteris paribus, would lead to a downgrade of the Class A VFN to BBB (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration 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 regulations only.

Initial Lead Analyst: Alessio Pignataro
Initial Rating Date: 25 November 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Dylan Cissou
Rating Committee Chair: Chuck Weilamann

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The rating methodologies and criteria used in the analysis of this transaction can be found at http://www.dbrs.com/about/methodologies and are as follows:

Legal Criteria for European Structured Finance Transactions
Master European Structured Finance Surveillance Methodology
Operational Risk Assessment for European Structured Finance Servicers
Unified Interest Rate Model for European Securitisations
Rating European Consumer and Commercial Asset-Backed Securitisations