DBRS Assigns Ratings to Mespil1 RMBS Limited

DBRS Ratings Limited (DBRS) has today assigned ratings to some of the notes issued under Mespil 1 RMBS Limited (Mespil1, issuer) as shown below:

•AA (sf) rating to the Class A1 notes aggregating EUR150,100,000 paying a fixed coupon of 2.5% p.a.;
•AA (sf) rating to the Class A2 notes aggregating EUR300,000,000 paying a fixed coupon of 2% p.a.; and
•AA (sf) rating to the Class A3 notes aggregating EUR300,000,000 paying a fixed coupon of 1.75% p.a.

The Class Z notes, which are junior to the above class of notes, are not rated.

Mespil1 RMBS Limited (Mespil1, issuer) is a securitisation of a portfolio of first ranking Irish residential mortgages funded by the issuance of four classes of mortgage—backed notes. The mortgages were originated by EBS Limited (EBS) and its wholly owned subsidiary Haven Mortgages Limited (Haven) and are also serviced by these entities. Mespil1 closed on 21 December 2010.

The rating is based upon review by DBRS of the following analytical considerations:

•The transaction’s capital structure and the form and sufficiency of available credit enhancement. Relevant credit enhancement is in the form of subordination, a reserve fund and excess spread. The Class A1, A2 and A3 will be the senior class of notes in the structure and will be supported by Class Z subordinated notes and a reserve fund of 1% of the notes issued.

•The Mespil1 mortgage portfolio is comprised of loans which were in minor or technical arrears before being sold to the issuer. This positive selection reflects in the performance of the mortgage portfolio so far with 3.36% of loans in arrears greater than or equal to 3 months. The performance so far is relatively better than other mortgage portfolios of rated RMBS transactions in Ireland.

•The Mespil1 mortgage portfolio consists of loans which currently pay fixed and variable rate of interest. At the end of the fixed rate period the loans paying fixed rate of interest will revert to variable rate of interest. In comparison the interest paid on the notes is fixed. This basis risk exposure is unhedged in the transaction. There is excess spread currently in the transaction and there are conditions where the servicer is obliged to maintain the standard variable rate above 1.5% which mitigates the risk of fall in excess spread during falling interest rate scenarios.

•The credit quality of the mortgages backing the notes and ability of the Servicer to perform collection activities on the mortgages.

•The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.

•The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

DBRS applied its Irish RMBS Criteria to assess the mortgage loss on the underlying mortgage portfolio for Mespil1.

Note:
All figures are in EUR unless otherwise noted.

The principal methodologies applicable are Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda, Legal Criteria for European Structured Finance Transactions and Swap Criteria for European Structured Finance Transactions which can be found on www.dbrs.com.

The sources of information used for this rating include data relating historical performance and repossession data from EBS Limited, performance history of Mespil1 since close of the transaction and performance history of publicly rated Irish RMBS deals from Intex. House prices’ statistics maintained by Central Statistics Office, Ireland. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is an existing financial instrument issued on 21 December 2010.

This is the first DBRS rating on this financial instrument.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

For additional information on these ratings, please refer to the linking document.

Lead Analyst: Kali Sirugudi
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: February 22, 2012