Scope Ratings UK Limited (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Duke Global Funding Ltd – Multi-currency CLO on 29 September 2022. The credit ratings remain as follows:

Class A-1 Senior Secured Floating Rate Notes due 2050: GBP 1,156,000,000: rated AA+_SF (ISIN XS2404569746)

Class A-2 Senior Secured Floating Rate Notes due 2050: USD 1,944,000,000: rated AA+_SF (ISIN XS2404573003)

Subordinated Notes due 2050: GBP 1,435,880,000: not rated

Duke Global Funding Ltd is a true-sale cash securitisation of a portfolio of corporate loans, commercial real estate loans and trade finance obligations denominated pound sterling, US dollar and euro. The loan obligations have been granted by Barclays Bank plc (Barclays), mainly to corporate borrowers based in the United States or the United Kingdom. The portfolio collateralises two pari-passu senior notes (classes A-1 and A-2) and subordinated notes.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com

Key rating factors

Scope’s review was based on the latest available investor reporting and portfolio information. As of 16 September 2022, the portfolio comprised 641 loans from 331 obligors. The average default risk of the portfolio is commensurate with a B+ rating, based on mapping between Barclays’ default grades of loans in the portfolio and Scope’s ratings.

The transaction is still in its replenishment phase until March 2024 and Barclays continues to apply its “maintain-or-improve” approach to replenishment. There are few minor breaches of portfolio profile tests, these were attributed to the amortisation of existing assets in the portfolio as opposed to the addition of poorer assets. Portfolio credit quality deteriorated slightly, this reflected in the deterioration of the default grade ratings of the portfolio. At closing however, Scope assumed and tested negative portfolio migration towards covenanted limits as well as additional sensitivities.

The transaction continues to provide overcollateralisation above the test levels, with the class A-1 Senior Par Value test reported at 146.1% above the trigger of 135.0% (however below the inception ratio of 147.1%). Similarly, the class A-2 test was reported at 137.9% but above the trigger of 130.0% (however below the inception ratio of 138.9%). Should overcollateralisation for any of the note classes fall below the respective test level, all available excess interest proceeds and principal proceeds will be diverted to amortise the respective currency’s senior notes until the test is cured. Owing to losses recorded, the credit enhancement has decreased since closing, with the class A-1 and class A-2 notes now benefiting from a lower 35.5% (inception credit enhancement 35.8%). Barclays have since repurchased the defaulted loans.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology,17 December 2021; Counterparty Risk Methodology, 14 July 2022; SME ABS Rating Methodology, 16 May 2022) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings UK Limited at 52 Grosvenor Gardens, London, SW1W 0AU, +44 207 8245180
Lead analyst: Mark Vrdoljak, Associate Director

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