DBRS Confirms Ratings of Thrones 2013-1 Plc

DBRS Ratings Limited (“DBRS”) has reviewed the Class A Notes issued by Thrones 2013-1 Plc (the “Issuer”) and confirms the rating of ‘AAA’ (sf).

Thrones 2013-1 is a securitisation of first ranking UK non-conforming residential mortgages originated by Heritable Bank Plc, who have been under administration since October 2008. In May 2013, the mortgage portfolio was purchased from the administrators of Heritable by Mars Capital Finance Limited. The named servicer on the transaction was originally Engage Credit Limited, who delegated its servicing activities to an affiliate company, Oakwood Global Finance LLP. Oakwood and Engage were acquired by Pepper (UK) Limited in September 2013.

Confirmation of the rating for the Class A Notes is based upon the following analytical considerations:

• Portfolio performance, in terms of the level of delinquencies and defaults, as of the 21 July 2014 payment date.
• Updated portfolio defaults, loss given defaults and expected losses estimates for the remaining pool.
• Current available credit enhancement to the Class A Notes to cover the expected losses at the ‘AAA’ (sf) rating level.

As of the 21 July 2014 payment date, the current delinquency ratio for loans more than 90 days overdue, as a percentage of the current balance of the portfolio (EUR 146 million), was 2.41%, while the delinquency ratio for loans more than 180 days overdue was at 0.11%. The cumulative default amount is zero to date. Mortgages are defined defaulted as soon as the property is being repossessed.

Credit enhancement for the Class A Notes, as a percentage of the performing collateral balance, consists of overcollateralisation and a Cash Reserve Fund. The Class A Notes have a current credit enhancement level of 34.04%.

The Cash Reserve Fund is allowed to amortise to 6% of the current portfolio balance with a GBP 4.873 million cap (current level).

Citibank N.A., London Branch (the “Account Bank”) holds the Treasury Account for the transaction. The DBRS private rating of the Account Bank complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in GBP unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release. This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by Citibank N.A./London Branch (the “Paying Agent”) and loan data level provided by Mars Capital (the “Master Servicer”). DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 31 July 2013, when DBRS assigned the rating of ‘AAA’ (sf) on the Class A Notes.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current receivables. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
• The base case PD and LGD of the current pool of mortgages for the Issuer are 11.55% and 16.59%, respectively. The corresponding levels at the ‘AAA’ (sf) rating level are 39.26% and 40.11%.
• The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of Class A Notes would be expected to remain at ‘AAA’ (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Class A Notes would be expected at decrease at AA (high) (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of AAA (sf)
• 50% increase in LGD, expected rating of AAA (sf)
• 25% increase in PD, expected rating of AAA (sf)
• 50% increase in PD, expected rating of AAA (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of AAA (high) (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

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

Initial Lead Analyst: Kali Sirugudi
Initial Rating Date: 31 July 2013
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Dylan Cissou
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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The rating methodologies and criteria used in the analysis of this transaction can be found at http://www.dbrs.com/about/methodologies

• Legal Criteria for European Structured Finance Transactions
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
• Unified Interest Rate Model for European Securitisations