DBRS Upgrades Ratings of Marketplace Originated Consumer Assets 2017-1 PLC

DBRS Ratings Limited (DBRS) upgraded the ratings of the following bonds issued by Marketplace Originated Consumer Assets 2017-1 PLC (MOCA or the Issuer):

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

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the October 2018 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels.

MOCA is a securitisation of receivables related to unsecured consumers loans granted by P2P Global Investments PLC via a marketplace lending platform operated by Zopa Limited (Zopa) to borrowers in the United Kingdom. Zopa acts as the platform servicer with Target Servicing Limited appointed as a backup servicer. The loans are all amortising, unsecured in nature, pay fixed instalments, and are assigned to specific risk markets. The loans are typically used for home improvements, debt consolidation or for the purchase of a vehicle.

PORTFOLIO PERFORMANCE
As of October 2018 payment date, loans that were one- to two-months in arrears represented 0.6% of the outstanding portfolio balance, whereas the two- to three-month arrear ratio was 0.4%. The cumulative default ratio was 2.5%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has maintained its base case PD and LGD assumptions at 6.2% and 85.0% respectively.

CREDIT ENHANCEMENT
As of the October 2018 payment date, credit enhancement increased since the DBRS initial rating:
-- For the Class A Notes, CE was 36.7%, up from 20.2%
-- For the Class B Notes, CE was 30.2%, up from 16.2%
-- For the Class C Notes, CE was 23.7%, up from 12.2%
-- For the Class D Notes, CE was 17.2%, up from 8.2%
-- For the Class E Notes, CE was 12.3%, up from 5.2%

The transaction benefits from a liquidity reserve of currently GBP 1.2 million, equal to 1% of the outstanding balance of the rated notes. It is available to cover senior fees, expenses and interest shortfall on the most senior class of notes. The transaction benefits also from a cash reserve of currently GBP 1.2 million, equal to 1% of the outstanding balance of the rated notes. It is available to cover senior fees, expenses and interest shortfall on any class of notes, top up the liquidity reserve and clear the principal deficiency ledgers.

Citibank, N.A. London Branch acts as the account bank for the transaction. The DBRS private rating of Citibank, N.A. London Branch is consistent with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

The Royal Bank of Scotland plc (RBS) acts as the interest rate cap counterparty for the transaction. The DBRS Long Term Critical Obligations Rating of RBS stands at “A” and the transaction downgrade provisions are consistent with DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

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

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”.

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

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

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 include servicer reports and loan-level data provided by Zopa and investor reports provided by Citibank, N.A. London Branch.

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 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.

This is the first rating action since 8 November 2017 when DBRS finalised its provisional rates on the ClasA Notes at AA (low) (sf), the Class B Notes at A (sf), the Class C Notes at BBB (sf), the Class D Notes at BB (sf) and the Class E Notes at B (sf).

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 6.2% and 85.0%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increased by 15%, the rating of the Class A Notes would be expected to remain at AA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A Notes would be expected to fall to AA (low) (sf), assuming no change in the LGD. Furthermore, if the PD and LGD increased by 50% and 15%, respectively, the rating of the Class A Notes would be expected to fall to AA (low) (sf).

Class A Notes Risk Sensitivity:
-- 7.5% increase in LGD, expected rating of AA (sf)
-- 15% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 7.5% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 15% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 7.5% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 15% increase in LGD, expected rating of AA (low) (sf)

Class B Notes Risk Sensitivity:
-- 7.5% increase in LGD, expected rating of A (high) (sf)
-- 15% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 7.5% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 15% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 7.5% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 15% increase in LGD, expected rating of BBB (high) (sf)

Class C Notes Risk Sensitivity:
-- 7.5% increase in LGD, expected rating of A (sf)
-- 15% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 7.5% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 15% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 7.5% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 15% increase in LGD, expected rating of BBB (low) (sf)

Class D Notes Risk Sensitivity:
-- 7.5% increase in LGD, expected rating of BBB (low) (sf).
-- 15% increase in LGD, expected rating of BB (high) (sf).
-- 25% increase in PD, expected rating of BB (sf).
-- 50% increase in PD, expected rating of B (high) (sf).
-- 25% increase in PD and 7.5% increase in LGD, expected rating of BB (low) (sf).
-- 25% increase in PD and 15% increase in LGD, expected rating of B (high) (sf).
-- 50% increase in PD and 7.5% increase in LGD, expected rating of B (sf).
-- 50% increase in PD and 15% increase in LGD, expected rating below B (sf).

Class E Notes Risk Sensitivity:
-- 7.5% increase in LGD, expected rating of B (high) (sf)
-- 15% increase in LGD, expected rating of B (sf)
-- 25% increase in PD, expected rating below B (sf)
-- 50% increase in PD, expected rating below B (sf)
-- 25% increase in PD and 7.5% increase in LGD, expected rating below B (sf)
-- 25% increase in PD and 15% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 7.5% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 15% increase in LGD, expected rating below B (sf)

For further information on DBRS historic 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: Ilaria Maschietto, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 16 October 2017

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

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

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.