Morningstar DBRS Takes Credit Rating Actions on Outstanding NewDay Funding Related Transactions

DBRS Ratings Limited (Morningstar DBRS) took credit rating actions on the notes listed below (collectively, the Notes) issued by NewDay Funding Master Issuer and NewDay Funding Loan Note Issuer following its annual review of the Notes:

NewDay Funding Master Issuer
Series 2021-3:
-- Class A1 Notes confirmed at AAA (sf)
-- Class A2 Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (low) (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (high) (sf)

Series 2022-1:
-- Class A1 Notes confirmed at AAA (sf)
-- Class A2 Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (low) (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (high) (sf)

Series 2022-2:
-- Class C Notes confirmed at A (low) (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (high) (sf)

Series 2022-3:
-- Class A Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (high) (sf)

Series 2023-1:
-- Class A1 Notes confirmed at AAA (sf)
-- Class A2 Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (high) (sf)

Series 2024-1:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (high) (sf)

Series 2024-2:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (high) (sf)

NewDay Funding Loan Note Issuer
Series 2022-2:
-- Class A Loan Note confirmed at AA (sf)

VFN-F1 V1:
-- Class A Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (high) (sf)

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

The Notes or each transaction is a securitisation of near-prime credit cards granted to individuals domiciled in the UK by NewDay Ltd. (NewDay or the originator) and are issued out of NewDay Funding Master Issuer or NewDay Funding Loan Note Issuer as part of the NewDay Funding-related master issuance structure under the same requirements regarding servicing, amortisation events, priority of distributions, and eligible investments. NewDay Cards Ltd. (NewDay Cards) is the initial servicer with Lenvi Servicing Limited (Lenvi) in place as the backup servicer for each transaction.

The credit ratings are based on the following analytical considerations:
-- Each transaction's structure, including the form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the issuer's financial obligations according to the terms under which the Notes are issued
-- The credit quality of NewDay's portfolio, the characteristics of the collateral, its historical performance and Morningstar DBRS' expectation of charge-offs, monthly principal payment rate (MPPR) and yield under various stress scenarios
-- NewDay's capabilities with respect to origination, underwriting and its position in the market and financial strength.
-- An operational risk review of NewDay Cards and Lenvi with respect to servicing
-- The transaction parties' financial strength regarding their respective roles
-- The consistency of the transaction's structure with Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology
-- The long term sovereign credit rating on United Kingdom of Great Britain and Northern Ireland, currently rated AA with a Stable trend.

TRANSACTION STRUCTURE

Each transaction typically includes a scheduled revolving period. During this period, additional receivables may be purchased and transferred to the securitised pool, provided that the eligibility criteria set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers or servicer termination. The servicer may have the option to extend the scheduled revolving period by up to 12 months. If the notes are not fully redeemed at the end of their respective scheduled revolving periods, the individual transaction would enter into a rapid amortisation.

Each transaction includes a series-specific liquidity reserve that has been replenished to the target amount in the transaction's interest waterfalls. The liquidity reserve is available to cover the shortfalls in senior expenses, senior swap payments if applicable and interest due on the Class A Class B, Class C and Class D Notes and would amortise to the target amount, subject to a floor of GBP 250,000.

As all British pounds sterling (GBP)-denominated Notes carry floating-rate coupons based on the daily compounded Sterling Overnight Index Average (Sonia), there is an interest rate mismatch between the fixed-rate collateral and the floating-rate Notes. The potential interest rate mismatch risk is to a certain degree mitigated by excess spread and the originator's ability to increase the credit card contractual rate and is considered in Morningstar DBRS' cashflow analysis.

As the NewDay Funding Master Issuer Series 2021-3, Series 2022-1 and Series 2023-1 have Class A2 Notes denominated in U.S. dollars (USD), there are balance-guaranteed, cross-currency swaps in each transaction to hedge the currency risk between the GBP-denominated collateral and the USD-denominated Class A2 Notes.

COUNTERPARTIES
HSBC Bank plc is the account bank for each transaction. Based on Morningstar DBRS' private credit ratings on HSBC Bank
plc and the downgrade provisions outlined in the transaction documents, Morningstar DBRS considers the risk arising
from the exposure to the account bank to be commensurate with the credit ratings assigned.

BNP Paribas SA, ING Bank N.V. and Banco Santander SA are the swap counterparties for the NewDay Funding Master Issuer, Series 2021-3 Class A2 swap, 2022-1 Class A2 swap and 2023-1 Class A2 swap, respectively. Morningstar DBRS has a Long-Term Issuer Rating of AA (low) on BNP Paribas SA, AA (low) on ING Bank N.V. and A (high) on Banco Santander SA which all meet the criteria to act in such capacity. The swap documentation for the above transactions also contains downgrade provisions consistent with Morningstar DBRS' criteria.

PORTFOLIO ASSUMPTIONS
The most recent total payment rate including the interest collections of the eligible portfolio was 14.7% based on the October 2024 investor report and continued to remain above historical levels. While the recent levels do not appear to be susceptible to the current inflationary pressures and interest rates, Morningstar DBRS elected to maintain the expected MPPR at 8% after removing the interest collections.

The most recent total yield of the eligible portfolio from the October 2024 investor report was 33.3%, up from the record low of 26% in May 2020 as a result of the consistent repricing of credit card rates by NewDay following the Bank of England base rate increases since mid-2022. After consideration of the observed trends and the removal of spend-related fees, Morningstar DBRS also maintained the expected yield at 27%.

Furthermore, the annualised charge-off rate of the eligible portfolio was 13.6% from the October 2024 investor report after reaching a record high of 17.6% in April 2020. Based on the analysis of historical charge-off rates, delinquencies and consideration of the current interest levels, Morningstar DBRS also maintained the expected charge-off rate at 18%.

Morningstar DBRS' credit ratings on the applicable classes of the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' credit ratings 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 Optional Redemption Date (as defined in and) in accordance with the applicable transaction documents.

Morningstar DBRS' 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.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August, 2024) https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed each transaction structure in Intex Dealmaker.

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

The principal methodology applicable to the credit ratings is Rating European Consumer and Commercial Asset-Backed Securitisations (18 September, 2024) https://dbrs.morningstar.com/research/439583.

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

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transactions in accordance with the surveillance section of 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 credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include the following data provided by the arranger, NewDay Cards, and monthly investor reports:
-- Total eligible portfolio: monthly receivables balances, total payment rates, gross yield, charge-off rates and purchase rates from September 2023 to July 2024 and static annual vintage data from 2008 to 2023, in respect of receivables balances, payment rates, gross charge-offs, gross yield
-- Total near-prime portfolio: monthly historical dynamic data from June 2007 to August 2023, including monthly receivables balances, total payment rates, gross yield, charge-off rates, and purchase rates and recoveries
-- Stratification tables in relation to the total eligible portfolio as of 31 July 2024

Morningstar DBRS also received additional data with regard to dilutions from January 2010 to August 2023 and from September 2023 to July 2024 for the total near-prime portfolio and the eligible portfolio, respectively..

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

Morningstar DBRS was supplied with third-party assessments for the following transactions: NewDay Funding Master Issuer, Series 2022-1, Series 2022-2, Series 2022-3, Series 2023-1, Series 2024-1 and Series 2024-2; and NewDay Funding Loan Note Issuer, Series 2022-2. Morningstar DBRS was not supplied with third-party assessments for NewDay Funding Loan Note Issuer, VFN-F1 V1, and NewDay Funding Master Issuer, Series 2021-3. However, this did not impact the rating analysis.

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

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

The last credit rating actions on NewDay Funding Master Issuer plc, Series 2021-3 (Class A1, Class A2 Class B, Class C, and Class F Notes), Series 2022-1 (Class A1, Class A2 Class B, Class C, and Class F Notes), Series 2022-2 (Class C Notes),and Series 2022-3 (Class A Notes), and NewDay Funding Loan Note Issuer, Series 2022-2 (Class A Note) and VFN-F1 V1 (Class A Notes and F Notes) took place on 15 November 2023 when Morningstar DBRS confirmed its credit ratings on these notes.

The last credit rating actions on NewDay Funding Master Issuer plc, Series 2021-3 (Class D and Class E Notes), Series 2022-1 (Class D and Class E Notes), Series 2022-2 (Class D, Class E and Class F Notes) and Series 2022-3 (Class D, Class E and Class F Notes), and NewDay Funding Loan Note Issuer, VFN-F1 V1 (Class E Notes) took place on 15 November 2023 when Morningstar DBRS upgraded its credit ratings on these notes.

The last credit rating actions on NewDay Funding Master Issuer plc, Series 2023-1 Notes took place on 21 November 2023 when Morningstar DBRS finalised its credit ratings on these notes.

The last credit rating actions on NewDay Funding Master Issuer plc, Series 2024-1 Notes took place on 3 April 2024 when Morningstar DBRS finalised its credit ratings on these notes.

The last credit rating actions on NewDay Funding Master Issuer plc, Series 2024-2 Notes took place on 2 July 2024 when Morningstar DBRS finalised its credit ratings on these notes.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating:

-- Expected MPPR of 8%
-- Expected yield of 27%
-- Expected charge-off rate of 18%

Scenario 1: a 25% decrease in the expected MPPR
Scenario 2: a 25% decrease in the expected yield
Scenario 3: a 25% increase in the expected charge-off rate
Scenario 4: a 15% decrease in the expected yield, a 15% decrease in the expected MPPR, and a 15% increase in the expected charge-off rate.

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

NewDay Funding Master Issuer, Series 2021-3:
-- Class A1 Notes: AA (low) (sf), AA (high) (sf), AA (sf), A (high) (sf)
-- Class A2 Notes: AA (low) (sf), AA (high) (sf), AA (sf), A (high) (sf)
-- Class B Notes: A (sf), AA (low) (sf), A (high) (sf), A (low) (sf)
-- Class C Notes: BBB (high) (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf)
-- Class E Notes: BB (low) (sf), B (high) (sf), BB (low) (sf), B (sf)
-- Class F Notes: B (sf), B (low) (sf), B (low) (sf), below B (low) (sf)

NewDay Funding Master Issuer, Series 2022-1:
-- Class A1 Notes: AA (low) (sf), AA (high) (sf), AA (sf), A (high) (sf)
-- Class A2 Notes: AA (low) (sf), AA (high) (sf), AA (sf), A (high) (sf)
-- Class B Notes: A (sf), AA (low) (sf), A (high) (sf), A (low) (sf)
-- Class C Notes: BBB (high) (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf)
-- Class E Notes: B (high) (sf), B (high) (sf), BB (low) (sf), B (sf)
-- Class F Notes: B (sf), below B (low) (sf), B (low) (sf), below B (low) (sf)

NewDay Funding Master Issuer, Series 2022-2:
-- Class C Notes: BBB (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf)
-- Class E Notes: B (high) (sf), : B (high) (sf), BB (low) (sf), B (sf)
-- Class F Notes: B (low) (sf), below B (low) (sf), B (low) sf), below B (low) (sf).

NewDay Funding Master Issuer, Series 2022-3:
-- Class A Notes: BBB (high) (sf), A (low) (sf), BBB (high)(sf), BBB (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf)
-- Class E Notes: B (high) (sf), B (high) (sf), BB (low) (sf), BB (sf)
-- Class F Notes: B (low) (sf), Below B (low) (sf), B (low) (sf), below B (low) (sf)

NewDay Funding Master Issuer, Series 2023-1:
-- Class A1 Notes: AA (low) (sf), AA (high) (sf), AA (sf), A (high) (sf)
-- Class A2 Notes: AA (low) (sf), AA (high) (sf), AA (sf), A (high) (sf)
-- Class B Notes: A (sf), AA (low) (sf), A (high) (sf), A (low) (sf)
-- Class C Notes: BBB (high) (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BBB (low) (sf), BB (sf)
-- Class E Notes: BB (low) (sf), BB (low) (sf), BB (low) (sf), B (high) (sf)
-- Class F Notes: B (sf), B (low) (sf), B (low) (sf), below B (low) (sf)

NewDay Funding Master Issuer, Series 2024-1:
-- Class A Notes: AA (low) (sf), AA (high) (sf), AA (sf), A (high) (sf)
-- Class B Notes: A (sf), A (high) (sf), A (high) (sf), A (low) (sf)
-- Class C Notes: BBB (high) (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf)
-- Class E Notes: B (high) (sf), B (high) (sf), B (high) (sf), B (sf)
-- Class F Notes: B (low) (sf), B (low) (sf), B (low) (sf), below B (low) (sf)

NewDay Funding Master Issuer, Series 2024-2,
-- Class A Notes: AA (low) (sf), AA (high) (sf), AA (sf), A (high) (sf)
-- Class B Notes: A (sf), AA (low) (sf), A (high) (sf), A (low) (sf)
-- Class C Notes: BBB (high) (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf)
-- Class E Notes: B (high) (sf), B (high) (sf), B (high) (sf), B (sf)
-- Class F Notes: B (sf), B (low) (sf), B (sf), below B (low) (sf)

NewDay Funding Loan Note Issuer, VFN-F1 V1:
-- Class A Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf).
-- Class E Notes: BB (low) (sf), B (high) (sf), BB (low) (sf), B (sf).
-- Class F Notes: B (sf), B (low) (sf), B (low) (sf), below B (low) (sf).

NewDay Funding Loan Note Issuer, Series 2022-2
-- Class A Notes: A (sf), AA (low) (sf), A (high) (sf), A (low) (sf)

For further information on Morningstar DBRS 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 Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Jeffrey Cespon, Vice President,
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Rating Dates:

-- NewDay Funding Master Issuer, Series 2021-3: 16 November 2021
-- NewDay Funding Master Issuer, Series 2022-1: 31 March 2022
-- NewDay Funding Master Issuer, Series 2022-2: 20 July 2022
-- NewDay Funding Master Issuer, Series 2022-3: 4 November 2022
-- NewDay Funding Master Issuer, Series 2023-1: 3 November 2023
-- NewDay Funding Master Issuer, Series 2024-1: 13 March 2024
-- NewDay Funding Master Issuer, Series 2024-2: 12 June 2024
-- NewDay Funding Loan Note Issuer, VFN-F1 V1: 15 December 2017
-- NewDay Funding Loan Note Issuer, Series 2022-2: 20 July 2022

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

The credit rating methodologies used in the analysis of the transactions can be found at https://dbrs.morningstar.com/about/methodologies.

-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583
-- Rating European Structured Finance Transactions Methodology (18 September 2024),
https://dbrs.morningstar.com/research/439581
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024),
https://dbrs.morningstar.com/research/437781
-- Master European Structured Finance Surveillance Methodology (6 August 2024),
https://dbrs.morningstar.com/research/437540
-- Derivative Criteria for European Structured Finance Transactions (6 September 2024),
https://dbrs.morningstar.com/research/439043

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.