DBRS Assigns Provisional Ratings to Marketplace Originated Consumer Assets 2017-1 PLC

DBRS Ratings Limited (DBRS) assigned provisional ratings to the Class A, Class B, Class C, Class D and Class E Notes (the Rated Notes) expected to be issued by Marketplace Originated Consumer Assets 2017-1 PLC (the Issuer). The ratings are as follows:

-- AA (low) (sf) to the Class A Notes
-- A (sf) to the Class B Notes
-- BBB (sf) to the Class C Notes
-- BB (sf) to the Class D Notes
-- B (sf) to the Class E Notes

The Classes X and Z Notes will not be rated by DBRS.

The above-mentioned ratings are provisional. The ratings will be finalised upon receipt of an execution version of the governing transaction documents. To the extent that the documents and information provided to DBRS as of this date differ from the executed version of the governing transaction documents, DBRS may assign different final ratings to the Rated Notes.

The transaction represents the issuance of notes backed by approximately GBP 209 million of receivables related to unsecured consumers loans granted by P2P Global Investments PLC (P2PGI) via a marketplace lending platform operated by Zopa Limited (Zopa) to borrowers in the United Kingdom. There is no revolving period and the transaction will begin to amortise immediately from the issue date. Zopa acts as the platform servicer with Target Servicing Limited appointed as a back-up servicer.

All the loans are fully amortising, unsecured in nature, have a maximum term of five years, pay fixed instalments, have a maximum advance of GBP 25,000 (excluding fees) and are segregated by specific risk markets. The loans are typically used for home improvements, debt consolidation or as a cash substitute for the purchase of a vehicle.

Zopa acts as the platform servicer. It is also responsible for the acquisition scorecards and underwriting processes associated with originations. Whilst Zopa services the receivables, the loans themselves are funded by lenders that are either classified as retail or institutional. For this transaction, all loans are whole loans (as opposed to micro loans) and relate to the seller P2PGI.

The transaction incorporates both an interest and principal waterfall. The interest waterfall includes a principal deficiency ledger (PDL) concept for each class of notes which, according to DBRS cash flow analysis and the terms of the transaction documents, results in the timely payment of interest for Class A Notes and ultimate payment of interest for the Class B, Class C, Class D and Class E Notes. The transaction documents permit the deferral of interest and this mechanism is not considered an event of default.

Credit enhancement in addition to subordination, excess spread and various reserves includes 20.0% subordination for the Class A notes, which consists of Class B (4.0%), Class C (4.0%), Class D (4.0%), Class E (3.0%) and Class Z (5.0%);16.0% subordination for the Class B notes; 12.0% subordination for the Class C notes; 8.0% subordination for the Class D notes and 5.0% subordination for the Class E notes.

The ratings are based on a review by DBRS of the following analytical considerations:
-- Transaction capital structure including form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support DBRS’s projected expected cumulative net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the payment of timely interest on a monthly basis and principal by the legal final maturity date for the Class A Notes and ultimate payment of interest and principal for the Class B, Class C, Class D and Class E Notes.
-- Zopa's capabilities with regard to originations, underwriting and servicing.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The credit quality as well as historical and projected performance of the portfolio.
-- The sovereign rating of the United Kingdom of Great Britain and Northern Ireland, currently rated AAA by DBRS.
-- The transaction’s consistency of the legal structure with the DBRS’s Legal Criteria for European Structured Finance Transaction methodology and the presence of legal opinions that address the true sale of the assets to the Issuer and non-consolidation of the special-purpose vehicle with the seller.

The transaction cash flow structure was analysed in Intex DealMaker.

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

The principal methodology applicable to the rating is: “Rating European Consumer and Commercial Asset Backed Securitisations”.

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

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

The sources of data and information used for this rating include performance and portfolio data relating to the loans originated through Zopa’s marketplace lending platform. DBRS received the following sets of data sourced by Zopa through the arranger, Deutsche Bank:
-- Static origination, default and recoveries data going back to March 2005 and up to August 2017; full historical data was provided that allowed the portfolio to be assessed by multiple variables including risk market and contract tenor.
-- Dynamic portfolio origination, outstanding balance, prepayment and arrears data from March 2005 and up to August 2017.
-- A provisional pool cut dated 28 September 2017.
-- A theoretical amortisation of the provisional pool.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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

To assess the impact of 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”):

-- Probability of default (PD): base case of 6.2%, a 25% and 50% increase on the Base Case PD.
-- Loss given default (LGD): base case of 85%, a 15% increase on the Base Case LGD.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the Base Case LGD by 15%, ceteris paribus, would lead to a downgrade of the rating of the Class A Notes to A (sf).
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to A(sf).
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class A Notes to BBB (high) (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (low) (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (sf).

DBRS concludes that for the Class B Notes:
-- A hypothetical increase of the Base Case LGD by 15%, ceteris paribus, would lead to a downgrade of the rating of the Class B Notes to A (low) (sf).
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (high) (sf).
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class B Notes to BBB (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (high) (sf).

DBRS concludes that for the Class C Notes:
-- A hypothetical increase of the Base Case LGD by 15%, ceteris paribus, would not lead to a downgrade of the rating of the Class C Notes.
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would lead to a downgrade of the Class C Notes to BBB (low) (sf).
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class C Notes to BB (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class C Notes to BB (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class C Notes to B (high) (sf).

DBRS concludes that for the Class D Notes:
-- A hypothetical increase of the Base Case LGD by 15%, ceteris paribus, would lead to a downgrade of the rating of the Class D Notes to BB (low) (sf).
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would lead to a downgrade of the Class D Notes to B (high) (sf).
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class D Notes to below B (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class D Notes to below B (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class D Notes to below B (sf).

DBRS concludes that for the Class E Notes:
-- A hypothetical increase of the Base Case LGD by 15%, ceteris paribus, would lead to a downgrade of the rating of the Class E Notes to below B (sf).
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would lead to a downgrade of the Class E Notes to below B (sf).
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class E Notes to below B (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class E Notes to below B (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical increase of the LGD by 15%, ceteris paribus, would lead to a downgrade of the Class E Notes to below B (sf).

For further information on DBRS 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: Alexander Garrod, Senior Vice President, Global Structured Finance
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 16 October 2017

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

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

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

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