Press Release

DBRS Morningstar Maintains Under Review with Negative Implications Status on Ratings of NewDay Partnership Related Transactions

Consumer Loans & Credit Cards

September 06, 2023

DBRS Ratings Limited (DBRS Morningstar) maintained its Under Review with Negative Implications (UR-Neg.) status on the ratings of the following NewDay Partnership related transactions:

NewDay Partnership Funding 2020-1 Plc:
-- Class A3 Notes rated AAA (sf)
-- Class B Notes rated AA (sf)
-- Class C Notes rated A (sf)
-- Class D Notes rated BBB (high) (sf)

NewDay Partnership Loan Note Issuer:
VFN-P1
-- V1 Class A Loan Note rated BBB (high) (sf)

-- V2 Class A Loan Note rated AAA (sf)
-- V2 Class B Loan Note rated AA (sf)
-- V2 Class C Loan Note rated A (sf)
-- V2 Class D Loan Note rated A (low) (sf)
-- V2 Class E Loan Note rated BBB (high) (sf)

-- V3 Class A Loan Note rated AAA (sf)
-- V3 Class B Loan Note rated AA (sf)
-- V3 Class C Loan Note rated A (sf)
-- V3 Class D Loan Note rated A (low) (sf)
-- V3 Class E Loan Note rated BBB (high) (sf)

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

DBRS Morningstar notes the NewDay Partnership Master Issuer plc, Series 2023-1 notes issued on 25 July 2023 were not placed UR- Neg.

DBRS Morningstar also understands the notes of NewDay Partnership Funding 2020-1 Plc are expected to be repaid in full on the scheduled redemption date in November 2023.

These above transactions are part of the NewDay Partnership master trust issuance structure, where all series of notes are supported by the same pool of receivables and generally issued under the same requirements regarding servicing, amortisation events, priority of distributions, and eligible investments.

RATING RATIONALE
On 8 June 2023, DBRS Morningstar placed the ratings of the above transactions UR-Neg. amid deteriorating collateral performance, specifically the monthly principal payment rates (MPPRs), after the termination of the commercial relationship between NewDay Cards Ltd. (NewDay) and Amazon in January 2023 and the migration of certain Amazon accounts onto the Pulse branded card since October 2022. For information on this rating action, please refer to the following press release: https://www.dbrsmorningstar.com/research/415562/dbrs-morningstar-places-newday-partnership-related-transactions-under-review-with-negative-implications.

The most recent investor report indicated a noticeably improved payment rate of 27.6% in July 2023, up from 19.3% in June 2023, with the yield rate and charge-off rate declining slightly to 24.5% in July 2023 from 26.5% in June 2023 and to 7.0% in July 2023 from 7.4% in June 2023, respectively. DBRS Morningstar notes the recent addition of the John Lewis partnership (JLP) receivables into the securitised portfolio in July 2023 appears to have the expected positive impact on the collateral performance; however; the history is too short to allow DBRS Morningstar to sufficiently assess the effects of their addition .

Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. While DBRS Morningstar typically endeavours to resolve the UR-Neg. status of ratings as soon as appropriate, it has elected to extend the UR-Neg. status beyond the 90-day period to keep monitoring the collateral performance.

DBRS Morningstar’s credit ratings on the notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s credit rating on the notes also addresses the credit risk associated with the increased rate of interest applicable to the notes if the notes are not redeemed on the initial scheduled redemption date as defined in and in accordance with the applicable transaction documents.

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at https://www.dbrsmorningstar.com/research/416784.

DBRS Morningstar analysed the transaction structure in Intex Deal Maker.

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

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in these transactions are listed at the end of this press release.

DBRS Morningstar is undertaking a review and will remove the ratings from this status as soon as it is appropriate.

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

An asset and a cash flow analysis were both conducted.

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

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include the following data provided by the arranger, NewDay, and monthly servicer reports:
-- Total managed portfolio: monthly historical dynamic data from January 2007 to July 2023 in respect of the receivables balances, monthly payment rates, gross charge-offs, yield, delinquencies, and purchase rates.
-- The monthly receivables balance and accounts of the securitised portfolio composition of JLP, Foundation partners and Amazon (Platinum and Classic) migration to Pulse from November 2020 to July 2023.
-- Stratification tables related to the securitised portfolio as of 31 July 2023.

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

At the time of the initial ratings for NewDay Partnership Funding 2020-1 Plc, DBRS Morningstar was supplied with a third-party assessment. DBRS Morningstar was not supplied with third-party assessments for NewDay Partnership Loan Notes VFN-P1 related sub-series. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

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

The last rating action on these transactions took place on 8 June 2023, when the ratings listed above were placed UR-Neg.

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

These ratings are placed Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. As such, sensitivity analysis is not applicable.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Jeffrey Cespon, Assistant Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Dates:
24 September 2020: NewDay Partnership Funding 2020-1 Plc
15 December 2017: NewDay Partnership Loan Note Issuer VFN-P1 V1 and VFN-P1 V2
16 August 2021: NewDay Partnership Loan Note Issuer VFN-P1 V3

DBRS Ratings Limited
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Tel. + 44 20 3107 0000

Registered and incorporated under the laws of England and Wales: Company No. 7139960

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

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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