DBRS Assigns Provisional Rating to Senior ETN of Series 2012 Senior VFN to be Issued by PCL Funding I Limited and Confirms Ratings on Term Notes and VFN Issued by PCL Funding I Limited

DBRS, Inc. (DBRS) has today assigned a provisional rating of AA (high) (sf) to a maximum of GBP 1,150,000,000 of Senior Eligible Trust Notes (ETNs) of the Series 2012 Senior Variable Funding Notes (VFNs) to be issued by PCL Funding I Limited (the Issuer). DBRS has also confirmed the ratings on the Issuer’s outstanding Term Notes and VFNs, which were originally issued in October 2012. The transaction represents a restructuring of a warehouse funding facility for the benefit of Premium Credit Limited. As part of the restructuring, in January 2017, the outstanding Term Notes will be repaid and the outstanding VFNs will be exchanged for the ETN certificates issued under the upsized Series 2012 Senior VFN.

The provisional rating is based on DBRS’s review of the following analytical considerations:
-- Transaction capital structure and form and sufficiency of available credit enhancement.
-- Historical performance data on the credit quality of collateral and the performance of existing warehouse facility to date.
-- Relevant credit enhancement in form of a liquidity cash reserve account and subordinated ETNs. Credit enhancement levels are sufficient to support the DBRS-projected expected cumulative net loss assumption under various stress scenarios at an AA (high) (sf) target rating level.
-- DBRS rating analysis incorporates the risks related to defaults by obligor, related insurance carrier and/or related intermediary as well as the currency volatility. Cash flow modeling scenarios generally reflect the worst-case collateral pool mix at the end of the revolving period. In addition, DBRS runs additional sensitivity analysis related to the grandfathering provision in the excess concentration limits with respect to certain changes in insurance carrier/intermediary mix.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
-- The legal structure and presence of legal opinions addressing the assignment of collateral assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The assets securing the ETN will be a revolving pool of commercial and consumer financing agreements originated primarily in the United Kingdom and financing non-life insurance premiums, sport and leisure membership fees, professional membership fees and private school tuition. The committed revolving period for the ETN will expire in December 2019 and the ETNs will have final maturity on a date which is two years after the end of the revolving period. Lloyds Bank plc will serve as administrative agent. The ETN will be held by several committed lenders. Premium Credit Limited will act as the servicer.

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

The applicable principal methodologies are Rating European Consumer and Commercial Asset-Backed Securitisations and Rating CLOs and CDOs of Large Corporate Credit, which can be found on our website under Methodologies.

This provisional rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

Please see the attached appendix for additional information regarding sensitivity of assumptions used in the rating process.