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Rating Action:

Moody's assigns provisional ratings to Marketplace Lending ABS to be issued by Marketplace Originated Consumer Assets 2016-1

20 Sep 2016

GBP 138 million ABS notes rated, relating to a portfolio of UK unsecured consumer loans

Frankfurt am Main, September 20, 2016 -- Moody's Investors Service has assigned the following provisional ratings to notes to be issued by Marketplace Originated Consumer Assets 2016-1 plc ("Moca 2016-1"):

....GBP[114.0] million Class A Notes due October 2024, Assigned (P)Aa3 (sf)

....GBP[7.5] million Class B Notes due October 2024, Assigned (P)A2 (sf)

....GBP[7.5] million Class C Notes due October 2024, Assigned (P)Baa2 (sf)

....GBP[9.0] million Class D Notes due October 2024, Assigned (P)Ba3 (sf)

GBP[12.0] million Class Z Notes will not be rated.

RATINGS RATIONALE

Today's provisional rating assignments reflect the transaction's structure as a static cash securitisation of unsecured consumer loans, originated through a marketplace lending online platform in the UK. Zopa Limited ("Zopa") (not rated) operates the platform and manages the underwriting process. P2P Global Investments PLC (not rated) was the initial lender of the securitised loan portfolio. The platform provider, Zopa, also acts as the servicer of the portfolio. Target Servicing Limited (not rated) has been appointed as back-up servicer of the transaction.

The securitised portfolio as of 31 August 2016 consists of unsecured consumer loans to UK private borrowers. According to the borrower but not verified by the platform provider these loans are mainly used to finance cars (36.2%), for debt consolidation (34.0%) and for home improvements (22.3%). The portfolio consists of 27,137 contracts with a weighted average seasoning of 10 months and a maximum loan term of five years. Most borrowers are employed full-time (89.9%) and their average outstanding loan balance with Zopa is GBP 5,500.

According to Moody's, the transaction benefits from: (i) a granular portfolio originated through the Zopa marketplace lending platform, (ii) a static structure that does not allow to buy additional receivables after closing, (iii) continuous portfolio amortization from day one, (iv) an independent cash manager and liquidity provided through two reserve funds, (v) an appointed back-up servicer at closing, and (vi) credit enhancement provided through subordination of the notes, reserve funds and excess spread.

Moody's notes that the transaction may be negatively impacted by: (i) misalignment of interest between the platform provider Zopa and investors who finance the loans, (ii) the fact that Zopa does not retain a direct economic interest in the securitized portfolio, (iii) the limited historical data that does not cover a full economic cycle, (iv) a higher fraud risk due to the online origination process, (v) an unrated servicer with limited financial strength, and (vi) the regulatory uncertainty due to the still developing regulation for the marketplace lending segment.

Moody's analysis focused, amongst other factors, on (i) historical performance data, (ii) the loan-by-loan data for the securitised portfolio including internal and external credit scores, (iii) the credit enhancement provided by subordination, the reserve fund and excess spread, (iv) the liquidity support available in the transaction by way of principal to pay interest and the liquidity reserve for the most senior outstanding class of notes, and (v) the appointment of the back-up servicer at closing.

MAIN MODEL ASSUMPTIONS

Moody's determined the portfolio lifetime expected defaults of 7.0%, expected recoveries of 5% and Aaa portfolio credit enhancement ("PCE") of 35.0% related to the loan portfolio. The expected defaults and recoveries capture our expectations of performance considering the current economic outlook, while the PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and PCE are parameters used by Moody's to calibrate its lognormal portfolio default distribution curve and to associate a probability with each potential future default scenario in the ABSROM cash flow model to rate Consumer ABS.

Portfolio expected defaults of 7.0% are higher than the EMEA consumer loan average and are based on Moody's assessment of the lifetime expectation for the pool taking into account (i) limited historical performance data of the loan book of the originator, (ii) benchmark transactions, (iii) the current economic uncertainty in the UK, and (iv) a rather new originator with a new business concept compared to classical loan origination.

Portfolio expected recoveries of 5% are lower than the EMEA consumer loan average for unsecured consumer loans and are based on Moody's assessment of the lifetime expectation for the pool taking into account (i) the limited strength and experience of the servicer (ii) historical performance of the loan book of the originator, and (iii) benchmark transactions.

The Aaa PCE of 35.0% is higher than the EMEA consumer loan average and is based on Moody's assessment of the pool taking into account the relative ranking of the platform provider to originator peers in the EMEA consumer loan market. The PCE level of 35.0% results in an implied coefficient of variation ("CoV") of 40.8%.

METHODOLOGY

The principal methodology used in these ratings was "Moody's Approach to Rating Consumer Loan-Backed ABS" published in September 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

The ratings address the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest on the class A notes and the ultimate payment of interest and principal at par on the class A to D notes, on or before the legal final maturity. 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.

Moody's issues provisional ratings in advance of the final sale of securities and the above ratings reflect Moody's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation and the final note structure, Moody's will endeavour to assign a definitive rating to the above notes. A definitive rating may differ from a provisional rating.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

FACTORS THAT WOULD LEAD TO AN UPGRADE OF THE RATINGS:

Significantly better-than-expected performance of the securitised portfolio would lead to an upgrade of the ratings, all else being equal.

FACTORS THAT WOULD LEAD TO A DOWNGRADE OF THE RATINGS:

Factors that may cause a downgrade of the rated notes include: (i) a decline of the performance of the pool beyond our expectations, (ii) a significant deterioration of the credit profile of the servicer, or (iii) unexpected, negative changes in the regulatory or market environment of the marketplace lending segment.

LOSS AND CASH FLOW ANALYSIS:

Moody's used its cash flow model Moody's ABSROM as part of its quantitative analysis of the transaction. Moody's ABSROM model enables users to model various features of a standard European ABS transaction - including the specifics of the loss distribution of the assets, their portfolio amortisation profile and yield. On the liability side of the ABS structure subordination and reserve fund.

STRESS SCENARIOS:

In rating consumer loan ABS, default rate and recovery rate are two key inputs that determine the transaction cash flows in the cash flow model. Parameter sensitivities for this transaction have been tested in the following manner: Moody's tested six scenarios derived from a combination of mean default rate: 7.0% (base case), 7.5% (base case + 0.5%), 8.0% (base case + 1.0%) and recovery rate: 5.0% (base case), 0% (base case - 5%).

The model output results for the class A notes under these scenarios vary from Aa3 (base case) to A2 assuming the mean default rate is 8.0% and the recovery rate is 0%, all else being equal. 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 model output for the class A notes might have differed if the two parameters within a given sector that have the greatest impact were varied. Model output results for the class B to D notes are shown in the pre-sale report for this securitization.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's describes its loss and cash flow analysis in the section "Ratings Rationale" of this press release.

Moody's describes the stress scenarios it has considered for this rating action in the section "Ratings Rationale" of this press release.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Armin Krapf
VP - Senior Credit Officer
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Anthony Parry
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

No Related Data.
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