NewDay Funding Master Issuer finalises ratings for UK credit card securitisation

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NewDay Funding credit card securitisation

Highlights

Morningstar DBRS finalised ratings for NewDay Funding Series 2026-1, assigning AAA (sf) to Class A Notes and BB (sf) to Class E.
The transaction securitises near-prime UK credit card receivables via NewDay Funding Master Issuer plc, with NewDay Cards Ltd. as servicer and Lenvi Servicing Limited as backup.
Interest rate mismatch exists with Sonia-linked floating-rate notes versus fixed rate collateral, partly mitigated by excess spread and NewDay's ability to raise card APRs.

Structure and rating rationale

As reported by Morningstar DBRS, the Series 2026-1 issuance carries finalised provisional ratings of AAA (sf) for the Class A Notes, AA (sf) for Class B, A (sf) for Class C, BBB (sf) for Class D and BB (sf) for Class E.

The transaction securitises near-prime credit cards granted to individuals domiciled in the UK by NewDay Ltd. and is issued through NewDay Funding Master Issuer plc under the group's master issuance structure. NewDay Cards Ltd. serves as the initial servicer, while Lenvi Servicing Limited is named as backup servicer.

Morningstar DBRS says its analysis considers the transaction structure, including the available credit enhancement and its ability to withstand stressed cash flow assumptions, as well as the portfolio's credit quality, collateral characteristics and historical performance. Its review also incorporates expectations for charge-off rates, monthly principal payment rates and yield under different stress scenarios.

Revolving period and risk considerations

The deal includes a scheduled revolving period during which additional receivables may be added to the securitised pool if they meet eligibility criteria set out in the transaction documents. That period can end early if performance triggers are breached or if the servicer is terminated, and the servicer may extend the scheduled revolving period by up to 12 months.

If the notes are not fully redeemed by the end of the scheduled revolving period, the transaction moves into rapid amortisation. Morningstar DBRS also highlights an interest rate mismatch because the notes are denominated in sterling and pay floating-rate coupons linked to daily compounded Sonia, while the underlying collateral is fixed rate.

The rating agency says that mismatch is partly mitigated by excess spread and by NewDay's ability to raise contractual annual percentage rates on the credit cards. It also considers the exposure to the account bank to be consistent with the assigned ratings, which address the credit risk tied to the transaction's interest payment amounts and class balances.

Our earlier coverage of sterling holding near a two-month high against the dollar noted that investors were growing more comfortable with the UK’s fiscal outlook, even as growth momentum remained fragile. We also highlighted that May GDP showed only marginal expansion and that official warnings on debt sustainability kept attention on potential tax rises or spending cuts, maintaining focus on fiscal credibility.

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