OREANDA-NEWS. Fitch Ratings has assigned Delamare Cards MTN Issuer plc's series 2015-1 notes expected ratings as follows:

Series 2015-1 A1: 'AAA(EXP)sf'; Outlook Stable
Series 2015-1 A2: 'AAA(EXP)sf'; Outlook Stable

The notes are backed by a pool of UK credit card receivables originated by Tesco Personal Finance PLC (TPF), a wholly-owned subsidiary of Tesco PLC (BB+/Negative/B).

The final ratings are contingent on the receipt of final documentation conforming to information already reviewed, including the issue amounts. Fitch expects to affirm Delamare's existing tranches when the final ratings are assigned.

KEY RATING DRIVERS

Sound Asset Performance
The charge-off performance of the Delamare pool has historically been better than Fitch's base case charge-off assumption of 5%. The agency's base case assumptions for the Delamare trust's monthly payment rate (35%) and yield rate (10%) remain unchanged since the last issuance of the 2014-1 notes.

Shifts in Portfolio Composition
New accounts originated since 2013 were added to the trust in March and June 2014, and in January 2015. These accounts have a fairly higher outstanding balance per account and include balance transfers (BT). They therefore slightly increase the trust's risk profile. Fitch does not consider the change material enough to warrant an adjustment to the charge-off base case and is therefore maintaining it at 5%.

Impact of Interchange Cap
Fitch has expected regulatory pressure on interchange fees for some time and therefore has not given full credit to interchange revenue when setting its base case yield assumption, as denoted in its Global Credit Card ABS Rating Criteria (see Related Criteria) and in previous reports.

EU regulation, as confirmed by a ruling of the European Court of Justice in September 2014, has reduced the cap on interchange fees to 0.3% (the current UK average is 0.9%) of transacted amounts and is due to come into force from 3Q15 in the UK.

Delamare's high payment rates and low charge-off rates make the portfolio more dependent on interchange fees than its competitors. Fitch has factored this in when setting the steady state portfolio yield. Fitch will continue to assess any downward pressure on yield resulting from regulatory and competitive forces.

Class D Variable Funding Note
The unrated class D principal amount may vary, subject to satisfaction of issuance and repayment tests, which include required subordination and minimum seller share conditions. Compared with fixed amount subordinated notes, the class D variable funding note provides operational flexibility to the programme when a senior class is issued or redeemed.

Importance of Reward Scheme
The strong payment and purchase rates of the Delamare trust are driven by Tesco plc's Clubcard points-based loyalty scheme. This makes the performance of the portfolio dependent on the continuity and attractiveness of the rewarding mechanism. Fitch downgraded Tesco plc to 'BB+'/Negative/'B' on 24 April 2015. The agency's assumptions for higher rating scenarios have always sought to capture the potential impact of a loss of the Clubcard loyalty scheme, and therefore the recent rating action on Tesco plc did not result in a change of assumptions for the Delamare trust.

Steady Asset Outlook
The performance of credit card trusts continued to improve throughout 1Q15, with charge-off, delinquency and payment rates improving, while yield rates declined over the same period (see Credit Card Index - UK 1Q15).

Fitch revised its GDP growth forecast to 2.5% from 2.6% for 2015 and maintained the forecast of 2.3% for 2016 in its March Global Economic Outlook. The agency believes annual UK unemployment rates for 2015 and 2016 will remain stable and eventually drop from a 5.6% forecast for 2015 to 5.5% in 2016. Fitch therefore maintains its stable outlook for UK credit card debt.

RATING SENSITIVIES
Rating sensitivity to increased charge-off rate
Class A current rating (base case: 5%): 'AAA(EXP)sf'
Increase base case by 25% for Class A: 'AA+(EXP)sf'
Increase base case by 50% for Class A: 'AA+(EXP)sf'
Increase base case by 75% for Class A: 'AA+(EXP)sf'

Rating sensitivity to reduced MPR
Class A current rating (base case: 35%): 'AAA(EXP)sf'
Reduce base case by 15% for Class A: 'AA+(EXP)sf'
Reduce base case by 25% for Class A: 'AA+(EXP)sf'
Reduce base case by 35% for Class A: 'AA+(EXP)sf'

Rating sensitivity to reduced purchase rate (ie aggregate new purchases divided by aggregate principal repayments in a given month)
Class A current rating (base case: 100%): 'AAA(EXP)sf'
Reduce base case by 50% for Class A: 'AA+(EXP)sf'
Reduce base case by 75% for Class A: 'AA+(EXP)sf'
Reduce base case by 100% for Class A: 'AA+(EXP)sf'

Rating sensitivity to increased charge-off rate and reduced MPR
Class A current rating: 'AAA(EXP)sf'
Increase charge-off rate by 25% and reduce MPR by 15% for Class A: 'AA+(EXP)sf'
Increase charge-off rate by 50% and reduce MPR by 25% for Class A: 'AA(EXP)sf'
Increase charge-off rate by 75% and reduce MPR by 35% for Class A: 'A+(EXP)sf'

Data Adequacy
Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis. Fitch also performed a file review during its last originator review in March 2015 to ensure it was comfortable with the quality of data.

Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.