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Rating Action:

Moody's assigns definitive ratings to ABS (Series 2011-3) issued by Gracechurch Card Programme Funding PLC

Global Credit Research - 21 Apr 2011

Approximately GBP 381m equivalent of securities rated

London, 21 April 2011 -- Moody's Investors Service has assigned the following definitive ratings to asset-backed notes (Series 2011-3) issued by Gracechurch Card Programme Funding PLC (the "Issuer"):

- Aaa (sf) to the EUR 225m Series 2011-3 Class A1 Floating Rate Asset-Backed Notes due 2016

- Aaa (sf) to the GBP 125m Series 2011-3 Class A2 Floating Rate Asset-Backed Notes due 2016

Series 2011-3 is the sixth issuance of Gracechurch Card Programme Funding PLC under its medium-term note programme and the 18th transaction to be ultimately backed by credit card receivables from Barclays Bank PLC's Gracechurch Receivables Trust. The assets backing the Notes are receivables arising under designated MasterCard and Visa revolving credit card accounts originated or acquired (excluding the recently acquired Egg and MBNA portfolios) in the UK by Barclaycard, a business unit of Barclays Bank PLC.

RATINGS RATIONALE

The ratings of the Class A1 and A2 Notes are based upon (i) the credit quality of the portfolio; (ii) the credit enhancement level of 15.0% provided by the Series 2011-3 Class D notes (unrated) as protection against losses; (iii) the excess spread available to the transaction; (iv) the expertise of Barclaycard as one of the leading originators and servicers of credit card receivables in the UK; (v) the structural and legal integrity of the transaction; and (vi) the strong credit quality of Barclays Bank PLC (Aa3/Prime-1) in its role as servicer and trust cash manager.

Moody's notes that there is no specific mechanism in the structure providing liquidity to pay interest on the Class A1 and A2 Notes throughout the life of the transaction in the event of any collections shortfall. All other parameters remaining constant, a downgrade of Barclays Bank PLC's long-term rating could negatively impact the initial rating on the Class A1 and A2 Notes. The highest ratings on the other outstanding notes issued and ultimately backed by the Gracechurch cards trust would be similarly impacted.

The transaction uses the existing receivables trust structure which was set up in November 1999. Barclaycard has assigned all receivables that had arisen or would arise in the accounts originated under certain designated product lines to the receivables trustee. The transaction involves a two step debt issuance: the proceeds of the rated Notes sold to investors finance the Issuer's purchase of limited recourse medium term note certificates, with the MTN issuer in turn using the cash to acquire an undivided beneficial interest in the receivables trust.

Interest will be paid monthly to the Notes in order of seniority from collections received by the Receivables Trustee. The structure envisions that, subject to specific criteria and triggers, up until close of business on 31 March 2013, asset principal collections received by the Receivables Trustee will be used to fund the transfer of further receivables which arise under the designated accounts. After this date, principal collections may be accumulated for a period of up to 12 months for noteholders in order to redeem the Notes at the scheduled maturity date. If the Notes are not fully repaid on the scheduled maturity date, a rapid amortisation trigger will be breached. The Notes have a legal final maturity date on 15 April 2016.

Barclaycard currently services the receivables in the receivables trust. Moody's has recently reviewed the servicing operations of Barclaycard and is comfortable that Barclaycard is well placed to fulfil its obligations in relation to servicing of the receivables. The minimum transferor interest floor is set at 5% to insure against dilution, fraud or attrition.

Moody's has been monitoring the performances of the Gracechurch cards trust since its inception. For an overview of the performance of Gracechurch and the other UK credit card trusts, see Moody's quarterly report UK Credit Card Indices.

Barclays offers repayment plan to certain customers experiencing financial difficulties, which, in Moody's opinion, may result in an artificial lowering of delinquency and charge-off rates and a distortion of the performance-related ratios.

On 2nd November 2010, Barclaycard repurchased over GBP639m worth of receivables relating to accounts in debt management from the Receivables Trustee, thereby clearing the trust of any repayment plan accounts. Moody's will continue to monitor the size of repayment plans as a percentage of the total trust balance going forward. Moody's had previously taken the issue of debt repayment plans into consideration in its analysis by considering a charge-off rate of up to 2.0% above the reported charge-off rate as reflecting the true performance of the trust. Moody's will consider the impact of Barclay's recent repurchase on the charge-off rate assumption and may make appropriate adjustments if necessary, mainly to consider if the level of debt repayment plans is under control going forward. As of February 2011, the percentage of trust receivables currently in repayment plans stands at approximately 1.1% .

Moody's expects performance in the range of 8.0% to 10.0% for charge-offs (see above), 16.0% to 18.0% for yield and 15.5% to 17.5% for the payment rate. Moody's performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities were rated. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.

Primary sources of assumption uncertainty are the current macroeconomic environment: further increase in the unemployment rate in the UK as a result of a deterioration of the country economy beyond stresses already applied may have a significant impact on the assigned ratings. Overall, Moody's central global scenario remains "Hook-shaped" for 2011; we expect overall sluggish recovery in most of the world largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels.

In addition, there is a relatively high degree of linkage of the rating of the Notes to the rating of Barclays Bank PLC, also acting as sponsor, seller, servicer, cash manager, swap counterparty, account bank and expenses loan provider.

The principal methodology used in this rating was Moody's Approach to Rating Credit Card Receivables-Backed Securities rating methodology, published in April 2007.

The Volatility Score ("V Score") for this transaction is Medium, which is in line with the V score assigned for the UK Credit Card ABS sector. On February 22, 2011, Moody's published a report introducing V Scores and Parameter Sensitivities for the UK credit card ABS sector. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. V Scores are intended to rank transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches).

Parameter Sensitivities provide a quantitative, model-indicated calculation of the number of notches that a Moody's-rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. It is not intended to measure how the rating of the security might migrate over time, but rather how the initial rating of the security might differ as certain key parameters vary. In rating UK Credit Card ABS, the payment rate, charge-off rate, purchase rate, yield and certain other inputs are used to calculate the median expected loss and the Aaa enhancement. These two, in turn, are the inputs used to determine a new lognormal loss distribution. Two new lognormal loss distributions were calculated for each rating class by assuming the following two payment and gross charge-off rate combinations: (1) 14%/11% and (2) 11%/14% from the base case of 17%/8%. The quantitative/model-indicated Parameter Sensitivities for the notes under these three additional scenarios are for the Class A Notes, one notch (i.e. Aaa to Aa1) and two notches, respectively.

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments in this transaction.

Moody's credit card model mainly focuses on the following performance parameters: (1) level of charge offs; (2) interest rates on the Notes issued; (3) servicing fees; (4) size of the minimum transferor interest; (5) the portfolio yield which is required for a credit card issuer to break even; (6) the principal payment rate; and (7) the purchase rate on the portfolio. Charge offs, portfolio yield and principal payment rate are severely stressed in various trust amortisation scenarios to determine the expected loss and hence the required credit enhancement at the different rating levels.

In its stress cases, Moody's analyses the effect of a sharp increase in charge-offs on the pool. Charge-offs are stressed immediately from the estimated steady state level to twice their expected level, and assumed to continue to rise over time. Ultimately they are assumed to rise to a level up to four times their expected rates. Similarly, the payment rate and yield are immediately stressed from an expected steady state assumption to a floor rate which equals approximately 1/3 and 2/3 of the expected steady state assumption respectively. These stressed floor rates are maintained for the duration of the assumed early amortization period.

Provisional ratings were initially assigned to the Class A1 and A2 Notes on 12 April 2011. Please note that the definitive issuance amounts on the A1 and A2 notes have changed since those assigned at the provisional rating given confirmed capital structure but are still in line with the initial credit analysis.

The ratings address the expected loss posed to investors by the legal final maturity date of the Notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal at par on or before their rated legal final maturity date. Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

REGULATORY DISCLOSURES

The ratings have been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

London
Ning Loh
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Milan
Alex Cataldo
Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100

Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's assigns definitive ratings to ABS (Series 2011-3) issued by Gracechurch Card Programme Funding PLC
No Related Data.
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