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      THURSDAY, 15/02/2024 - Scope Ratings GmbH
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      Scope has completed a monitoring review for Duke Global Funding Ltd – Multi-currency CLO

      The periodic review has resulted in no rating action.

      Scope Ratings GmbH (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 12 February 2024. 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 cash securitisation of a portfolio of mainly corporate loans and a smaller share of commercial real estate loans (capped at 10% of the aggregate collateral balance, as defined in the documentation) denominated in 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. The transaction originally closed on 9 November 2021 and has a revolving period scheduled to end in March 2027, following the most recent amendments which become effective from the 15 of February 2024.

      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 26 October 2023, the portfolio comprised 891 loans from 544 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.

      Credit-positive

      Credit enhancement (positive). The class A-1 and class A-2 notes benefit from the 35.2% of credit enhancement provided by subordination and cross-collateralisation upon shortfalls and note pay-offs.

      Overcollateralisation test (positive). The OC test helps to maintain the proper collateralisation of the senior notes with performing collateral. 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 137.3% 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.

      Experienced corporate lender (positive). The loans are part of the core origination activity of Barclays, whose record in domestic and international corporate lending spans more than a century, with a focus on lending to large corporates.

      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.

      Low recovery rates (negative). The portfolio will generally comprise senior unsecured exposures, which results in low expected recoveries upon default.

      High concentration in specific industries (negative). About 40.8% of the portfolio is concentrated in four industries as per the Moody’s industrial classifications: Real Estate, Banking, Finance and Insurance. This may further rise during the life of the transaction as the corresponding portfolio profile limit is set at 50%. This leaves the transaction vulnerable to a downturn in these specific industries.

      Portfolio management criteria (negative). The collateral quality test based on the weighted average rating factor allows a possible deterioration of the portfolio’s current credit profile to a default risk commensurate with B-. This is mitigated by the reinvestment criteria, which ensure that the credit quality of replenished assets is at least maintained.

      The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 25 January 2023; Counterparty Risk Methodology, 13 July 2023; SME ABS Rating Methodology, 16 May 2023) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst Guang Yang, Analyst

      © 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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