DBRS Upgrades the Ratings on the Notes of PCL Funding I Limited to A (high) (sf)

DBRS, Inc. (“DBRS”) has upgraded the Term Notes and Variable Funding Notes (collectively, the “Notes”) issued by PCL Funding I Limited to a rating of ‘A’ (high) (sf).

The maximum issuance amount for the Term Notes is £400 MN and £750 MN for the Variable Funding Notes.

The assets securing the Notes are a revolving pool of commercial and consumer financing agreements originated primarily in the United Kingdom and financing non-life insurance premiums, sport & leisure membership fees, professional membership fees and private school tuition. The committed revolving period of the facility expires in November 2016, and the facility has a final maturity in 2018. Lloyds Bank plc serves as Administrative Agent and the facility has several committed lenders.

The transaction was reviewed to determine the effect of proposed facility amendments and the ratings are based upon review by DBRS of the following analytical considerations:
• Transaction capital structure and form and sufficiency of available credit enhancement.
• Updated historical performance data on the collateral.
• Relevant credit enhancement in the form of a liquidity cash reserve account and overcollateralization. Credit enhancement levels are sufficient to support DBRS projected expected cumulative net loss (CNL) assumption under various stress scenarios at a ‘A (high)’ (sf) standard for the Notes.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
• The transaction parties’ capabilities with respect to originations, underwriting, servicing, and financial strength.
• The credit quality of the collateral and ability of the Servicer to manage collections activities on the collateral.
• The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in GBP unless otherwise noted.

The principal methodologies applicable are the European Consumer and Commercial Asset-Backed Securitisations and Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs).

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

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include performance data relating to the receivables provided by Premium Credit Limited. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on October 15, 2013, when the ratings on the Notes of PCL Funding I Limited were placed under review with developing implications.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• Probability of Default Rates Used: A 25% and 50% increase on the stressed case PD.
• Recovery Rates Used: Stressed recovery rate assumption was used.
• Loss Given Default Rate Used: A 25% and 50% increase on the stressed case LGD.

DBRS concludes that for the Term Notes and for the Variable Funding Notes:

• A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the notes to A (low) (sf).
• A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the of the notes to BBB (high) (sf).
• A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the of the notes to BBB (high) (sf).
• A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (low) (sf).
• A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (low) (sf).
• A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (high) (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

This credit rating has been issued outside the European Union (EU) and is endorsed by DBRS Ratings Limited. It may be used for regulatory purposes by financial institutions in the EU.

Initial Lead Analyst: Sergey Moiseenko
Initial Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: October 31, 2012

Last Rating Date: November 4, 2013
Lead Rating Analyst: Sergey Moiseenko
Rating Committee Chair: Chuck Weilamann

DBRS, Inc.
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New York, NY 10005
USA

The principal methodologies applicable are:
The rating methodologies and criteria used in the analysis of this transaction can be found at:
http://www.dbrs.com/about/methodologies.

• Rating European Consumer and Commercial Asset-Backed Securitisations.
• Legal Criteria for European Structured Finance Transactions.
• Operational Risk Assessment for European Structured Finance Servicers.
• Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs).
• Derivative Criteria for European Structured Finance Transactions.
• Unified Interest Rate Model Methodology for European Securitisations.