A leading non-life insurance premium financing (IPF) provider based in the U.K. is preparing to securitize nsaction backed by a pool of £1 billion (US$1.29 billion) in payment-plan receivables.

PCL Funding II will issue a yet-to-be amount of bonds that will be backed by receivables from the managed portfolio of receivables serviced by Premium Credit Ltd., a one-time subsidiary of  HSBC that now has a 50% share of the U.K. insurance premium finance market.

As of Feb. 28, the asset trustee has purchased receivables totaling about £1 billion, covering 1.9 million receivables. The average receivable principal balance was £536, from an original average balance of £1,212. The average remaining terms are 5.7 months.

There will be rated classes of British pound-denominated notes, including a Class A note that has a provisional triple-A ratings from DBRS and Moody's Investors Service. The Class A notes will be backed by 15.25% credit enhancement.  

The Class B notes are rated A (high) with 9.75% CE, and the Class C notes at 6% with a rating of BBB (high).

DBRS’ stressed cash flow modeling assumed a cumulative net loss range from 4.77% to 10.9% on the notes, and modeled an assumed recovery rate is 81.1%.

PCL is an originator of IPF provider that offers financing to individuals and businesses to spread the upfront costs of annual home, fire or liability insurance premiums, professional membership fees, sport and leisure fees, private school tuition or commercial service charges in monthly installments.

In 2016, according to DBRS, the Surrey, UK-based company had more than 2.9 million customers with annual net advances of £3.6 billion that are processed with 30 million direct debit transactions.

The company has been issuing notes under its PCL Funding II and PCL Funding 1 trusts since 2012. It’s most recent transaction was issuing £1.15 billion senior eligible trust notes in its PCL Funding 1 trust, which carried a senior-note rating of AA.  

The company was acquired in February 2015 by European private equity firm Cinven.

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