The current ratings on the class A and class B notes are available here and here, respectively.

Heta Funding Designated Activity Company is a balance sheet cash securitisation of UK corporate loans denominated in sterling. The loans were granted by Barclays Bank PLC. The portfolio collateralises two pari passu senior notes (class A-1 and A-2), two pari passu mezzanine notes (class B-1 and B-2) and the class C notes. The transaction closed on 11 October 2018.

Scope’s review was based on latest available investor reporting and portfolio information. As of the end of September 2019, the portfolio comprised 993 loans from 488 obligors. The average default risk of the portfolio is commensurate with a BB+ rating, based on a mapping between Barclays’ default grades for the portfolio loans and Scope’s ratings.

The transaction exhibits a good performance. No defaults have been recorded to date and the overcollateralisation ratio stands at 137.9%, meeting both senior par value and excess spread reserve tests. All tests regarding the portfolio profile and collateral quality are met as of the end of September 2019.

Scope has analysed the portfolio on a loan-by-loan basis using a Monte Carlo simulation. The resulting default distribution exhibits a mean default rate of 6.8% over a weighted average life of 5.7 years. This assumption represents a long-term view on the portfolio’s credit performance and incorporates the credit quality, the management criteria and the current weighted average life of the portfolio.

Scope assumed a base case portfolio recovery rate of 61.7%. The rating-conditional portfolio recovery rates are 37.0% at AAA level and 41.9% at AA.

The transaction is exposed to Elavon Financial Services DAC, UK Branch as account bank, calculation agent and principal paying agent; Deutsche Bank AG, London Branch as collateral administrator; Deutsche Bank Luxembourg SA as registrar; Deutsche Trustee Company Limited as trustee; and Barclays Bank PLC as basis swap counterparty. Counterparty risk has not changed materially.

Scope will continue to monitor Heta Funding DAC on an ongoing basis.

Ratings and research are freely available at www.scoperatings.com.