DBRS Assigns New Ratings to Fastnet Securities 10 Limited

DBRS Ratings Limited (DBRS) has today assigned ratings to the following notes issued by Fastnet Securities 10 Limited (Fastnet 10):

-- €828,800,000 Class A1 Notes at AA (high) (sf)
-- €414,400,000 Class A2 Notes at AA (sf)
-- €310,800,000 Class A3 Notes at A (high) (sf)

Fastnet 10 is a securitisation of a portfolio of residential mortgage loans secured by first-ranking liens on properties in the Republic of Ireland, originated by permanent tsb p.l.c. (PTSB; rated BB (low) and R-4, with Negative trends). Fastnet 10 will use the proceeds of the Class A1, Class A2, Class A3 (collectively, the Rated Notes) and unrated Class Z Notes to fund the purchase of the mortgage portfolio.

The ratings are based on a review by DBRS of the following analytical considerations:

-- The transaction’s capital structure, form and sufficiency of available credit enhancement. Relevant credit enhancement in the form of subordination and a General Reserve Fund to the Class A1, Class A2 and Class A3 Notes will be 62.0%, 42.0% and 27.0%, respectively.

-- Liquidity to the Rated Notes is provided by the General Reserve Fund, availability of principal collections to pay for scheduled interest payments and the Liquidity Reserve Fund.

-- The portfolio is, on average, 7.72 years seasoned. Of the portfolio, 13.75% is currently under a forbearance plan, while an additional 12.40% has been on a forbearance plan in the past. Of those loans currently on a forbearance plan, 69.74% has been greater than 12 months in arrears in the last year and 34.20% has been greater than three months in arrears in the last year. DBRS received historic information on the payment history of each borrower over the past five and a half years. DBRS incorporated this information into the analysis to estimate the Probability of Default (PD) on the underlying portfolio, as described in the Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda.

-- The transaction’s servicing arrangement consists of PTSB being the servicer of the transaction, Homeloan Management Limited acting as backup servicer and Deutsche Bank AG, London Branch (privately rated by DBRS) acting as the backup cash manager. In DBRS’s view, this setup can mitigate a potential servicer termination event and therefore remedy potential interest shortfalls due to operational issues.

-- Deutsche Bank AG, London Branch is the Issuer Account Bank for the transaction. The DBRS Private Rating for Deutsche Bank, AG London Branch is above the Minimum Institution Rating, given the rating of the most senior class of notes per the DBRS Legal Criteria for European Structured Finance Transactions.

-- The portfolio consists of loans which currently pay mostly variable rates on either the European Central Bank (ECB) Rate or PTSB’s standard variable rate (SVR), with a small portion paying a fixed rate, which will switch to a variable rate within the next four years. The Rated Notes are indexed to one-month Euribor, while the Class Z Notes pay a fixed rate of 0.05%. The basis risk is unhedged in the transaction. DBRS has stressed the portfolio margin based on historical data of PTSB’s SVR and ECB Rate.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Master European Residential Mortgage-Backed Securities rating Methodology and Jurisdictional Addenda (August 2014).

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 PTSB and their agents. 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.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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 in addition to its base case further stress scenarios for its main rating parameters PD and Loss Given Default (LGD) in its cash flow analysis. The two additional stresses assume a 25% and 50% increase in both the PD and LGD assumptions for each series of Rated Notes. The Base Case PD and LGD for the current pool are 14.87% and 41.36%, respectively. For the AA (high) (sf) rating level, the corresponding PD is 42.56% and the LGD is 66.54%. For the AA (sf) rating level, the corresponding PD is 39.13% and the LGD is 64.98%. For the A (high) (sf) rating level, the corresponding PD is 35.61% and LGD is 61.88%.

DBRS concludes that for the Class A1 Notes:

• A hypothetical increase of the PD by 25% and constant LGD, ceteris paribus, would lead to a downgrade of the Class A1 Notes to AA (sf).
• A hypothetical increase of the PD by 50% and constant LGD, ceteris paribus, would lead to a downgrade of the Class A1 Notes to A (sf).
• A hypothetical increase of the LGD by 25% and constant PD, ceteris paribus, would lead to a downgrade of the Class A1 Notes to AA (sf).
• A hypothetical increase of the LGD by 50% and constant PD, ceteris paribus, would lead to a downgrade of the Class A1 Notes to AA (low) (sf).
• A hypothetical increase of the PD by 25% and increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A1 Notes to A (high) (sf).
• A hypothetical increase of the PD by 25% and increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A1 Notes to A (low) (sf).
• A hypothetical increase of the PD by 50% and increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A1 Notes to A (low) (sf).
• A hypothetical increase of both the PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A1 Notes to BBB (sf).

DBRS concludes that for the Class A2 Notes:

• A hypothetical increase of the PD by 25% and constant LGD, ceteris paribus, would lead to a downgrade of the Class A2 Notes to AA (low) (sf).
• A hypothetical increase of the PD by 50% and constant LGD, ceteris paribus, would lead to a downgrade of the Class A2 Notes to A (low) (sf).
• A hypothetical increase of the LGD by 25% and constant PD, ceteris paribus, the Class A2 Notes would expected to remain at AA (sf).
• A hypothetical increase of the LGD by 50% and constant PD, ceteris paribus, would lead to a downgrade of the Class A2 Notes to A (high) (sf).
• A hypothetical increase of the PD by 25% and increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to A (low) (sf).
• A hypothetical increase of the PD by 25% and increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to BBB (high) (sf).
• A hypothetical increase of the PD by 50% and increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to BBB (sf).
• A hypothetical increase of both the PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to BBB (low) (sf).

DBRS concludes that for the Class A3 Notes:

• A hypothetical increase of the PD by 25% and constant LGD, ceteris paribus, would lead to a downgrade of the Class A3 Notes to A (sf).
• A hypothetical increase of the PD by 50% and constant LGD, ceteris paribus, would lead to a downgrade of the Class A3 Notes to BBB (sf).
• A hypothetical increase of the LGD by 25% and constant PD, ceteris paribus, the Class A3 Notes would expected to remain at A (low) (sf).
• A hypothetical increase of the LGD by 50% and constant PD, ceteris paribus, would lead to a downgrade of the Class A3 Notes to BBB (high) (sf).
• A hypothetical increase of the PD by 25% and increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A3 Notes to BBB (sf).
• A hypothetical increase of the PD by 25% and increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A3 Notes to BBB (low) (sf).
• A hypothetical increase of the PD by 50% and increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A3 Notes to BBB (low) (sf).
• A hypothetical increase of both the PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A3 Notes to BB (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: Keith Gorman
Initial Rating Date: 27 November 2014
Initial Rating Committee Chair: Quincy Tang
Lead Surveillance Analyst: Elisa Scalco

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