DBRS Confirms Ratings on TS Lago One GmbH

DBRS Ratings Limited (DBRS) has today confirmed its rating on the Class A notes of TS Lago One GmbH (the Issuer) at AAA (sf).

The confirmation of the rating is based on the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the January 2015 payment date.
-- Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AAA (sf) rating level.

TS Lago One GmbH is a securitisation of a portfolio of residential, multi-family and to a smaller extent commercial mortgage loans originated and serviced by Commerzbank AG (Commerzbank).

The 90+ delinquency ratio has remained at zero since the closing of the transaction. The reason for this null value is that Commerzbank repurchases all loans that are delinquent for more than 90 days. As a consequence, the current cumulative default ratio is also at zero. Since the transaction closing date, Commerzbank has repurchased 4.49% of the original collateral balance.

As of the January 2015 payment date, credit enhancement to the Class A notes stands at 39.73%, up from 33.73% in January 2014. Credit enhancement to the Class A notes comprises the subordination of the Class B notes.

The transaction has a 364 day Liquidity Facility that can be renewed at the Liquidity Facility Provider’s option every year. If the Liquidity Facility Provider (currently Commerzbank) elects not to renew the facility, then a standby drawing is to be made. The Liquidity Facility is sized at 4% of the aggregate principal amount of underlying loans and has a floor of 2% of the underlying loans as at the date the transaction initially closed. As of the January 2015 payment date, the amount of the liquidity facility was at the floor of EUR 292 million.

Commerzbank holds the Treasury Account for the transaction. The DBRS private rating of Commerzbank complies with the Minimum Institution Rating given the rating assigned to the Class A notes, as described in the DBRS “Legal Criteria for European Structured Finance.”

Notes:
All figures are in euros unless otherwise noted.

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

The sources of information used for this rating include investor reports provided by Commerzbank AG and data from the European DataWarehouse. 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 14 March 2014 when DBRS confirmed the ratings of AAA (sf) to 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 with 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 assets. 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 7.16% and 35.91%, respectively. At the AAA (sf) rating level, the corresponding PD is 28.86% and the LGD is 73.01%.
-- 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 the 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 for the Class A notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to fall to 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 AA (high) (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration 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: Alastair Bigley
Initial Rating Date: 22 February 2013
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960.

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 (December 2014)
-- Master European Structured Finance Surveillance Methodology (December 2014)
-- Operational Risk Assessment for European Structured Finance Servicers (January 2015)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (January 2015)
-- Unified Interest Rate Model for European Securitisations (January 2013)