NewDay Cards, one of the largest near-prime specialist credit-card issuers in the UK, is in the market with an as-yet unsized offering of GPB-denominated bonds backed by a portfolio of more than £1.16 billion (US$1.48 billion) in receivables.

DBRS assigned provisional ratings to NewDay Funding 2017-1, including a triple-A rating to the senior Class A note class, which is supported by 50% subordination of five other classes of notes. The exact size of the individual floating-rate tranches will be determined at the close of the transaction.

The collateral includes 1.14 million accounts with an average balance of £1,014 (US$1,294), or about half the average credit limit of £2,013. The accounts have less seasoning than those of many large-bank UK card securitizations, at 49.9 months. The a weighted average annual percentage rate of 38.12%. (Near-prime cards typically charge between 25-40% APRs; prime cards usually are a maximum 20%, according to DBRS).

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The lack of deep seasoning as well as “relatively” high loss rates compared with large-bank card securitizations was a note of concern by DBRS; but the portfolio is buoyed by the acquisition of card portfolios with lower loss levels, the agency added.

The company’s managed portfolio also has had a stable monthly principal payment rate of between 8% and 10% since 2013. Charge-off rates, which exceeded 25% in 2010 and 2011, have been declining and were at 15-16% in 2016, DBRS noted.

DBRS has projected a base gross yield of 28% on the portfolio, in line with the managed portfolio’s performance of 30% and above since 2013.

NewDay has built up its near-prime card portfolio through organic card issuance as well as acquiring card businesses from HSBC (2007) and Citibank (2010). NewDay, founded in 2001 as SAV Credit, was rebranded after the acquisition of the co-branded credit card and store card business from Santander UK.

The new securitization does not include any of these accounts.

NewDay has been securitizing UK credit-card receivables since late 2014. DBRS has rated three previous NewDay asset-backed issuances since 2015. The company is owned by private equity firms Cinven and CVC Capital Partners.

Bank of America Merrill Lynch, Santander Global Corporate Banking, Societe Generale and Citigroup are co-lead managers. BofAML and NewDay Cards are co-arrangers.

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