Morningstar DBRS Confirms AAA (sf) Credit Rating on Wilmington Cards 2021-1 Plc

DBRS Ratings Limited (Morningstar DBRS) confirmed its AAA (sf) credit rating on the Class A Notes issued by Wilmington Cards 2021-1 Plc (the Issuer).

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date.

Morningstar DBRS does not rate the Class D Notes also issued in this transaction.

The transaction is a securitisation of credit card receivables, which were originated by MBNA Limited and acquired in June 2017 by Lloyds Banking Group. The transaction is currently in its revolving period and the scheduled redemption date for the Class A Notes is in March 2026.

CREDIT RATING RATIONALE
This rating action follows the transaction annual review and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, charge-offs, principal payment rates, and yield rates, as of the January 2025 payment date
-- Current available credit enhancement to the Class A Notes and ability of the transaction to cover the expected losses at the AAA (sf) credit rating level
-- No revolving termination events have occurred

PORTFOLIO PERFORMANCE AND KEY DRIVERS
As of the January 2025 payment date, the reported figures from the investor report are as follows: the monthly principal payment rate (MPPR), the default rate, and the yield rate were 16.1%, averaging 14.7% since closing, 3.2%, averaging 2.6% since closing, and 11.8%, averaging 9.4% since closing, respectively.

As of the January 2025 payment date, receivables two to three months in arrears represented 0.4% of the outstanding portfolio balance, while receivables more than three months in arrears represented 1.0% of the outstanding portfolio balance.

While the portfolio MPPR has fluctuated between 13% and 16% since closing and the recent levels do not appear to be susceptible to the current inflationary and interest rate environment, Morningstar DBRS elected to maintain the expected MPPR at 9.5%.

Since closing the charge-off rate has been steadily climbing and began stabilising from July 2024. Delinquency roll rate analysis indicates charge-offs will remain at the current level in the near future. Based on the historical trends and delinquency roll rate analysis, the expected charge-off rate is maintained at 5.0%.

The portfolio yield has trended upward between January 2023 and January 2025; however, as interest rates have been reduced, the yield may reduce in the near future if the credit cards are repriced lower to remain competitive. As such the expected yield assumption is maintained at 8.5%.

CREDIT ENHANCEMENT AND RESERVES
As of the January 2025 payment date, credit enhancement to the Class A Notes was 23.0%, stable since the Morningstar DBRS initial credit rating because the transaction has remained in the revolving period. Credit enhancement is provided by the subordination of the unrated Class D Notes.

The transaction benefits from a liquidity reserve that is available to cover senior fees and Class A Notes interest. The target level of the reserve is 1% of the outstanding balance of the Class A Notes (currently at GBP 33,500,000) and is subject to a floor of GBP 250,000.

COUNTERPARTIES
Bank of Scotland plc (Bank of Scotland) is the issuer account bank for the transaction. Based on the Morningstar DBRS Long-Term Issuer Rating of the Bank of Scotland at AA (low), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit rating on the Class A Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS' credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents 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 factors 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 at https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

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

The principal methodologies applicable to the credit rating are "Master European Structured Finance Surveillance Methodology" (4 February 2025), https://dbrs.morningstar.com/research/447080 and "Rating European Consumer and Commercial Asset-Backed Securitisations" (18 September 2024), https://dbrs.morningstar.com/research/439583.

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

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

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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 this credit rating include investor reports from Lloyds Bank.

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

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

Morningstar DBRS considers the data and information available to it for the purposes of providing this credit rating 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 action on this transaction took place on 8 March 2024, when Morningstar DBRS confirmed its AAA (sf) credit rating on the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Bobby Heap.

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: 9.5%
-- Expected Yield Rate: 8.5%
-- Expected Charge-Off Rate: 5.0%

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

Morningstar DBRS concludes that the expected credit ratings of the Class A Notes under the four stress scenarios will be AA (sf), AAA (sf), AA (high) (sf), and AA (sf), respectively.

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.

This credit rating is endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Bobby Heap, Senior Analyst
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Rating Date: 12 March 2021

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The credit rating methodologies used in the analysis of this transaction 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 (19 November 2024),
https://dbrs.morningstar.com/research/443199
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024),
https://dbrs.morningstar.com/research/439913
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196
-- 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 (4 February 2025),
https://dbrs.morningstar.com/research/447080

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 dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.