OREANDA-NEWS. November 18, 2015. Fitch Ratings has affirmed SECURITISATION OF CATALOGUE ASSETS LIMITED's notes, as follows:

GBP1,215m class A notes, due November 2024: affirmed at 'Asf'; Outlook Stable
GBP100m class B notes, due November 2024: affirmed at 'BBBsf'; Outlook Stable

Fitch notes that there will be no impact on the ratings from the imminent extension of the transaction's revolving period by one year, and replacement of the back-up servicer (PwC) with Link Financial Outsourcing Ltd.

Fitch has analysed the potential portfolio migration and performance deterioration over the amended revolving horizon and has concluded that the structure is sufficiently robust to mitigate the additional risk presented by the extension. Fitch has also considered the back-up servicing arrangements with Link Financial Services and considers that the risk of servicing discontinuity remains adequately mitigated within the transaction.

The amendment is expected to take place on 16 November 2015. Following the revolving period extension, the transaction is expected to revolve until December 2018 subject to early amortisation events.

The transaction is a securitisation of short-term loans for home-shopping purposes originated by Shop Direct Finance Company Limited and extended to UK-based prime and non-prime customers. The pool incorporates two distinct products with different characteristics: i) a credit card type product that charges a specific yield and incorporates a minimum payment each month (the direct product); and ii) a credit line that allows customers to purchase products up to a certain limit, but each purchase incorporates a defined repayment profile (the embedded product). As the transaction is revolving, pool composition has the potential to substantially vary over time.

KEY RATING DRIVERS
The affirmation reflects the transaction's stable asset performance since closing with all indicators remaining in line with Fitch's original steady state expectations. Charge-offs have averaged 12.3% since closing, comfortably below Fitch's steady state expectation of 17%. Yield for the direct pool (as there is no interest payable on the majority of Embedded products) has averaged 34.3% including fee income, which is also comfortably above the steady state assumption applied at closing of 30%.

Monthly payment rates (MPR) have averaged 9.3%. While this is above Fitch's steady state assumption of 8.5%; unlike most Fitch-rated UK credit card transactions, we applied derived payment rate assumptions for the pool during the analysis given the unique mechanics of the Embedded product (defined repayment profiles). Fitch has thus modelled several scenarios assuming changing asset composition and therefore varying MPR performance and believes that the structure remains sufficiently robust.

RATING SENSITIVITIES
Transaction sensitivity is in line with that at closing. In order to test sensitivity we have assumed that the pool migrates to a composition of 75% Direct and 25% Embedded product over the revolving period. We applied a derived MPR considering this composition.

We have not run MPR stress sensitivity for this deal as the derived MPRs represent the characteristics of the pool and not a dynamic level as in other UK credit card deals.

We have tested the sensitivity of the results to charge-off levels as this is the most appropriate test for the transaction. The results are as follows:

Expected impact upon the note rating of increased charge-offs:
Current rating: 'Asf'/'BBBsf'
Increase base case charge-offs by 10%: 'A-sf'/'BB+sf'
Increase base case charge-offs by 25%: 'BBB+sf'/'BBsf'
Increase base case charge-offs by 50%: 'BBB-sf'/'B+sf'

A 50% increase in charge-off levels would lead to a four-notch downgrade of the class A notes and a five-notch downgrade of the class B notes.

However, these results should be treated with some caution as the dynamic nature of the credit enhancement available for the transaction should capture any deteriorating asset performance and the CE should be increased automatically to avoid any negative rating action.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis.

Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transaction closing, 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.

SOURCES OF INFORMATION
The information below was used in the analysis:
- Dynamic performance data for the Embedded and Direct subportfolios from September 2004 until September 2015

REPRESENTATIONS AND WARRANTIES
The representations, warranties, and enforcement mechanisms (RW&Es) contained in the transaction documents that are available to investors are substantially comparable to those typically contained in European credit card transactions, as described in Fitch's research 'Representations and Warranties and Enforcement Mechanisms in Global Structured Finance', dated 12 June 2015 at www.fitchratings.com.