DBRS Upgrades Class A3 and Confirms Class A2 Notes Issued by Fastnet Securities 6 Limited

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the Notes issued by Fastnet Securities 6 Limited (Fastnet 6 or the Issuer):

-- Class A2 rating is confirmed at AAA (sf)
-- Class A3 rating is upgraded to AA (low) (sf), previously A (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 (LGD) and expected loss assumptions for the remaining collateral pool.
-- Sovereign credit strength of the Republic of Ireland (rated “A” with a Positive trend by DBRS).
-- Current available credit enhancement to the Notes to cover the expected losses at the AAA (sf) and AA (low) (sf) rating level.

Fastnet 6 closed in November 2008 and is a securitisation of first-lien Irish residential mortgages originated between 1998 and 2008 by Permanent tsb plc.

As of 30 November 2015, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance have decreased to 13.34% from 16.15% a year ago. During the same period, loans more than 12 months delinquent have also decreased to 15.43% from 17.86%.

Following the upgrade of Republic of Ireland’s sovereign rating to “A” from A (low) on 13 March 2015 (see press release titled, “DBRS Upgrades Republic of Ireland to “A,” Stable Trend” at www.dbrs.com), DBRS has now applied less sovereign stress in the transaction and reduced the 2-year probability of default (PD) assumption to 1.86% from 2.00% on the collateral pool. There continues to be a portion of the pool experiencing long delinquency and non-payment. DBRS applied additional stresses on those loans.

The house prices in Ireland continue to recover since DBRS first rated the transaction. From January to November 2015, house prices outside Dublin have recovered by 9.89% and by 5.11% in Dublin according to the Central Statistics Office.

Following the improved performance of the transaction, the improved Irish sovereign credit strength and the improved house prices in Ireland, DBRS has reduced the transaction’s lifetime PD assumption at the B rating level to 24.15% from 28.48% and LGD or loss severity assumption to 44.63% from 48.74%. Consequently, DBRS upgraded the Class A3 rating to AA (low) (sf).

The credit enhancement available to Class A2 and Class A3 notes increased to 77.8% and 44.6%, respectively, through transaction deleveraging. The sources of credit enhancement are the subordination of junior notes and the non-amortizing reserve fund currently at its target level.

BNP Paribas, London Branch, is the Account Bank on the transaction. Its current DBRS private rating meets the Minimum Institution Rating criteria given the rating assigned to Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

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 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

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.

For a more detailed discussion of the 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 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 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 10 August 2015, when the Class A1 Notes rating was discontinued following the Notes’ fully redemption. The lead responsibilities for this transaction have been transferred to Kevin Ma.

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 PD and 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 24.15% and 44.63%, respectively. At the AAA (sf) rating level for Class A2, the corresponding PD is 49.93% and the LGD is 74.40%. At the AA (low) (sf) rating level for Class A3, the PD is 42.80% and the LGD is 64.92%.
-- 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 A2 Notes would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A2 Notes would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Classes A2 Notes would be expected to be at AA (sf).

Class A2 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 AA (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf).

Class A3 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in LGD, expected rating of BBB (sf).
-- 25% increase in PD, expected rating of AA (low) (sf).
-- 50% increase in PD, expected rating of A (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (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 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: Sebastian Hoepfner
Initial Rating Date: 21 January 2015
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Kevin Ma
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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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 analysis structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375