DBRS Finalises Provisional Ratings on Notes Issued by NewDay Funding 2018-1 plc

DBRS Ratings Limited (DBRS) finalised its provisional ratings on the Class A1, Class A2, Class B, Class C, Class D, Class E and Class F Notes (collectively, the Notes) issued by NewDay Funding 2018-1 plc (the Issuer) as follows:

-- AAA (sf) on the Class A1 Notes
-- AAA (sf) on the Class A2 Notes
-- AA (high) (sf) on the Class B Notes
-- A (high) (sf) on the Class C Notes
-- BBB (low) (sf) on the Class D Notes
-- BB (low) (sf) on the Class E Notes
-- B (high) (sf) on the Class F Notes

The ratings of the Notes address the timely payment of interest and ultimate repayment of principal by the final maturity date.

The ratings are based on the considerations listed below:
-- The transaction capital structure including the form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support DBRS’s expected charge-off, payment and yield rates 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.
-- NewDay Ltd (the Seller) and its delegates’ capabilities with respect to originations, underwriting, servicing, data processing and cash management.
-- DBRS conducted an operational risk review of the Seller and deems it to be an acceptable servicer.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The credit quality of the collateral and diversification of the collateral and historical and projected performance of the Seller’s portfolio.
--The sovereign rating of the United Kingdom, currently rated AAA with a Stable trend by DBRS.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, the presence of legal opinions that address the true sale of the assets to the Issuer and non-consolidation of the Issuer with the Seller or transferor.

The transaction cash flow structure was analysed in DBRS’s proprietary Excel-based tool.

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.

An asset and a cash flow analysis were both conducted.

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.

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 Rating Sovereign Governments methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings includes performance data relating to the receivables provided by NewDay directly. DBRS received monthly dynamic historical performance data and static performance data for the entire book, including the organic and acquired credit card portfolios in respect of receivables balances, payment rates, yield rates, loss rates and recoveries from June 2007 to April 2018. Furthermore, updated stratification tables were provided for the securitised pool.

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

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 these ratings to be of satisfactory quality.

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

The ratings concern newly issued financial instruments. These are the first DBRS ratings on these financial instruments.

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:

-- Expected Charge-Off Rate: 16%
-- Expected Principal Payment Rate: 8%
-- Expected Yield Rate: 28%

Scenario 1: a 25% increase on the Expected Charge-Off Rate
Scenario 2: a 25% decrease on the Expected Principal Payment Rate.
Scenario 3: a 25% decrease on the Expected Yield Rate.
Scenario 4: a 15% increase on the Expected Charge-Off Rate, 15% decrease on the Expected Principal Payment Rate and 15% decrease on Expected the Yield Rate.

DBRS concludes that the expected ratings under the four stress scenarios are:

-- Class A1/A2 Notes: AAA (sf), AA(high) (sf), AAA (sf), AAA (sf).
-- Class B Notes: AA (high) (sf), AA (sf), AA (high) (sf), AA (high) (sf).
-- Class C Notes: A (high) (sf), A (low) (sf), A (high) (sf), A (high) (sf).
-- Class D Notes: BBB (low) (sf), BB (high) (sf), BBB (low) (sf), BBB (low) (sf).
-- Class E Notes: BB (low) (sf), BB (low) (sf), BB (low) (sf), BB (low) (sf).
-- Class F Notes: B (sf), B (high) (sf), B (low) (sf), B (low) (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: Kevin Chiang, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 20 June 2018

DBRS Ratings Limited
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United Kingdom
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 Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.