DBRS Confirms Ratings on the Notes Issued by Fastnet Securities 10 Limited

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the Notes issued by Fastnet Securities 10 Limited (Fastnet 10) as follows:

-- Class A1 Notes rating is confirmed at AA (high) (sf)
-- Class A2 Notes rating is confirmed at AA (sf)
-- Class A3 Notes rating is confirmed at A (high) (sf)

Today’s rating actions are based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults
-- Portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool
-- Sovereign credit strength of Republic of Ireland
-- Current available credit enhancement to the Notes to cover the expected losses at the AA (high) (sf), AA (sf), and A (high) (sf) rating level

Fastnet 10 closed in November 2014 and is a securitisation of first lien Irish residential mortgages originated by permanent tsb p.l.c., mainly between 2006 and 2008 (71% of the collateral pool as of the end of August 2015).

As of 30 September 2015, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance have increased to 0.90% from 0.11% at closing. There are no outstanding repossessions and no loss realised. The performance is within DBRS’s expectation.

Following the upgrade of Republic of Ireland’s sovereign rating to A from A (low) on 13 March 2015 (http://dbrs.com/research/277813/dbrs-upgrades-republic-of-ireland-to-a-stable-trend.html), DBRS now applies less sovereign stress in the transaction and reduced the two-year probability of default assumption to 1.42% from 1.60% on the collateral pool. DBRS applied additional stresses on the loans restructured and remaining delinquent.

House prices in Ireland continue to recover since DBRS first rated the transaction in 2014. House prices in Dublin increased by 3.83% and outside Dublin by 7.07% between November 2014 and September 2015.

Following the improved Irish sovereign credit strength, and the improved house prices in Ireland, DBRS has reduced the transaction’s lifetime probability of default assumption at the B rating level to 12.82% from 14.87% and loss given default or loss severity assumption to 39.96% from 41.36%.

There has been limited prepayment activities in the collateral pool. In addition, around 30% of the principal payment proceeds were from loan repurchases. The credit enhancement available to Class A1, A2 and A3 Notes, as a result, only increased slightly to 65.11%, 44.09% and 28.32% respectively. The sources of credit enhancement are the subordination of junior notes and the non-amortising reserve fund currently at its target level.

As the performance trend of the transaction’s collateral pool is still developing and the increase in credit enhancement to the Notes has been limited, DBRS confirms the current ratings on the three classes of rated Notes.

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.

Notes:

All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”, 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.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/ published on 24 May 2014.

The sources of information used for this rating include reports provided by Permanent tsb plc and data from the European DataWarehouse.

DBRS does not rely upon third-party due diligence in order to conduct its analysis. DBRS was not supplied with third party assessments. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing these ratings 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 is the first rating action since the Initial Rating Date. The lead responsibilities for this transaction
have been transferred to Kevin Ma.

The last rating action on this transaction took place on 27 November 2014, when Class A1, A2 and A3 ratings were assigned.

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 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 12.82% and 39.96%, respectively. At the AA (high) (sf) rating level for Class A1, the corresponding PD is 38.28% and the LGD is 66.08%. At the AA (sf) rating level for Class A2, the PD is 34.97% and the LGD is 64.47%. At the A (high) (sf) rating level for Class A3, the corresponding PD is 31.62% and the LGD is 61.26%.

-- 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 on the Class A1 Notes would be expected to be at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A1 Notes would be expected to be at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Classes A1 Notes would be expected to be at BBB (High) (sf).

Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Class A3 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (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: Kevin Ma
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
1 Minster Court, 10th Floor Mincing Lane, London EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960

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

Unified Interest Rate Model for European Securitizations
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

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375