Scope has completed a monitoring review of the following notes issued by Sirius Funding plc:

Class A1 Senior Secured Floating Rate Notes due 2039 (ISIN XS1846706585), EUR 1,265,625,000: AAA_SF

Class A2 Senior Secured Floating Rate Notes due 2039 (ISIN XS1846709175), USD 1,527,525,000: AAA_SF

Class A3 Senior Secured Floating Rate Notes due 2039 (ISIN XS1846709258), GBP 2,900,000,000: AAA_SF

Subordinated Notes due 2039: GBP 1,850,000,000: not rated

Sirius Funding plc is a true-sale cash securitisation of a portfolio comprised of corporate loans denominated in sterling (GBP), US dollars (USD) and euros (EUR). The loans were granted by Barclays Bank plc (Barclays), predominantly to its United Kingdom and European corporate borrowers. The currency portfolios collateralise three pari-passu senior notes denominated in EUR, USD and GBP. The transaction closed on 28 June 2018.

The review took place on 20 November 2020 using transaction data up to November 2020, and has resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found at www.scoperatings.com.

Key rating factors

The class A1, A2 and A3 notes continue to benefit from 25%, 25% and 27.5% subordination, respectively, as well as cross-collateralisation upon shortfalls, and are protected by overcollateralisation tests.

The portfolio shared on 5 November 2020 is comprised of 790 loans to 427 obligors. The portfolio has an average default risk commensurate with a BB+ rating, based on a mapping of the default grades that Barclays assigned to each loan in the portfolio to Scope’s ratings. The portfolio is representative of Barclays’ corporate loan book and is managed according to criteria aimed at maintaining credit quality and adequate diversification.

Credit-positive (+)

Transaction performance (positive). There has been no reduction in the portfolio par balance. It currently stands at an aggregate GBP 7,000m equivalent, the same level as at the last restructuring date of December 2019. Therefore, the class A1, A2 and A3 notes continue to benefit from robust 25%, 25% and 27.5% subordination, respectively, in addition to cross-collateralisation upon shortfalls.

Portfolio management criteria (positive). The portfolio management criteria essentially result in a maintenance of the portfolio’s current credit profile, i.e. a senior unsecured loan portfolio with a maximum weighted average life of 4.2 years and limited concentrations.

Overcollateralisation test (positive). The overcollateralisation tests help to maintain the proper collateralisation of the notes with performing collateral. Upon a test breach, principal and interest proceeds from the portfolios are diverted to repay the senior notes.

Credit-negative (-)

Market risk exposure (negative). The transaction is exposed to fluctuations in foreign exchange rates and interest rates, which are partially mitigated by the natural hedge provided by the senior notes.

UK SME obligors (negative). About 23.5% of the portfolio consists of obligors whose Barclays’ default grade was derived using Barclays’ rating models which are specific to UK small and medium enterprises. These obligors are usually more sensitive to economic downturns and provide lower recoveries upon default.

UK economy (negative). The UK economy is facing a severe economic contraction in 2020, fuelled by the Covid-19 pandemic and ongoing uncertainties linked to Brexit. Despite governmental support measures, the borrowers in the current pool are likely to face decreasing earnings and more stressed liquidity, affecting their overall credit quality.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, published on 18 December 2019; Methodology for Counterparty Risk in Structured Finance, published 8 July 2020) are available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Benoit Vasseur, Executive Director

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