Morningstar DBRS Assigns Provisional Credit Ratings to NewDay Funding Master Issuer plc, Series 2025-1

DBRS Ratings Limited (Morningstar DBRS) assigned provisional credit ratings to the following classes of notes (collectively, the Notes) to be issued by NewDay Funding Master Issuer plc (the Issuer):

-- Series 2025-1, Class A Notes at (P) AAA (sf)
-- Series 2025-1, Class B Notes at (P) AA (sf)
-- Series 2025-1, Class C Notes at (P) A (sf)
-- Series 2025-1, Class D Notes at (P) BBB (sf)
-- Series 2025-1, Class E Notes at (P) BB (high) (sf)
-- Series 2025-1, Class F Notes at (P) BB (sf)

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

The transaction is a securitisation of near-prime credit cards granted to individuals domiciled in the UK by NewDay Ltd. (NewDay) and is issued out of the 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 the transaction.

CREDIT RATING RATIONALE
Morningstar DBRS based its credit ratings of the Notes on the following analytical considerations:
-- The 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 the charge-off rate, monthly principal payment rate (MPPR), and yield rate under various stress scenarios
-- Morningstar DBRS' operational risk review of NewDay and NewDay Cards' capabilities regarding origination, underwriting, servicing, position in the market and financial strength
-- Morningstar DBRS' operational risk review of NewDay Cards and Lenvi regarding servicing
-- The transaction parties' financial strength regarding their respective roles
-- The expected consistency of the transaction's structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology
-- Morningstar DBRS' long-term sovereign credit rating on United Kingdom of Great Britain and Northern Ireland, currently AA with a Stable trend

TRANSACTION STRUCTURE

The transaction 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 extend the scheduled revolving period by up to 12 months. If the Notes are not fully redeemed at the end of the scheduled revolving period, the transaction will enter into a rapid amortisation.

The transaction also includes a series-specific liquidity reserve to cover shortfalls in senior expenses, senior swap payments (if applicable) and interest on the Class A, Class B, Class C and Class D Notes (collectively, Senior Classes) and would amortise to the target amount of []% of Senior Classes' outstanding balance, subject to a floor of GBP 250,000.

As the Notes are denominated in GBP with 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 Sonia-based coupon rates. The potential interest rate mismatch risk is to a certain degree mitigated by excess spread and NewDay's ability to increase the credit card annual percentage contractual rates.
COUNTERPARTIES
HSBC Bank plc is the account bank for the transaction. Based on Morningstar DBRS' private credit rating on HSBC Bank 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.

PORTFOLIO ASSUMPTIONS
The most recent total yield from the February 2025 investor report of the NewDay Funding-related eligible portfolio was 34.0%, up from the record low of 26% in May 2020 because of the consistent repricing by NewDay following the Bank of England base rate increases since mid-2022. Nonetheless, the yield is expected to follow the trend of the Bank of England base rate, which has been declining since August 2024. After consideration of the observed trends and the removal of spend-related fees, Morningstar DBRS elected to maintain the expected yield at 27%.

For the charge-off rates, the eligible portfolio reported 12.9% February 2025 after reaching a record high of 17.6% in April 2020. Morningstar DBRS notes the levels have remained below 18% since June 2020, albeit with some volatility, and elected to revise the expected charge-off rate to 16% from 18% in light of the easing of inflation, lower interest rates and Morningstar DBRS' improved credit outlook for near prime borrowers.

The most recent total payment rate including the interest collections of the eligible portfolio was 15.3% in February 2025 which remains above historical levels and the recent levels continue to be resilient in the current economic environment and is also reflected in Morningstar DBRS' improved credit outlook for near prime borrowers. As such, Morningstar DBRS revised the expected MPPR to 9% from 8% after removing the interest collections.

Morningstar DBRS' credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the Notes are the related Interest Payment Amounts and the Class Balances.

Morningstar DBRS' credit ratings on the Notes also address 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 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 (13 August 2024) 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 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 this transaction are listed at the end of this press release.

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

An asset and a cashflow analysis were both conducted.

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 servicer reports:
-- Total eligible portfolio: monthly receivables balances, total payment rates, gross yield, charge-off rates, and purchase rates from September 2023 to December 2024 and static annual vintage data from 2008 to 2023, in respect of receivables balances, payment rates, gross charge-offs, gross yield
-- Total managed 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 December 2024
--Dilutions from January 2010 to August 2023 and from September 2023 to December 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. However, this did not affect the credit 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned securities are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalise the credit ratings.

These credit ratings concern expected-to-be-issued new financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

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 ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings:

-- Expected MPPR of 9%
-- Expected yield of 27%
-- Expected charge-off rate of 16%

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 MPPR, a 15% decrease in the expected yield and a 15% increase in the expected charge-off rate

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

-- Class A: AA (low) (sf), AA (high) (sf), AA (high) (sf), AA (low) (sf)
-- Class B: A (high) (sf), AA (low) (sf), A (high) (sf), A (sf)
-- Class C: BBB (high) (sf), A (low) (sf), BBB (high) (sf), BBB (sf)
-- Class D: BB (high) (sf), BBB (low) (sf), BBB (low) (sf), BB (high) (sf)
-- Class E: BB (sf),BB (low) (sf), BB (low) (sf), B (high) (sf)
-- Class F: BB (low) (sf), B (high) (sf), BB (low) (sf), B (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 Date: 19 March 2025

DBRS Ratings Limited
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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

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.