DBRS Confirms Ratings on Dilosk RMBS No. 1 Limited

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the notes issued by Dilosk RMBS No.1 Limited (Dilosk 1) as follows:

-- Class A notes confirmed at AAA (sf)
-- Class B notes confirmed at AA (sf)
-- Class C notes confirmed at A (sf)
-- Class D notes confirmed at BBB (sf)

The rating confirmations are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and losses.
-- Portfolio probability of default rate (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement (CE) available to the notes to cover the expected losses at the respective rating levels.

Dilosk 1 closed in May 2015 and is a securitisation of the first-ranking Irish residential mortgages originated by ICS Building Society, which was previously part of the Bank of Ireland Group. Dilosk Limited acquired the mortgage portfolio, the ICS brand and the mortgage distribution platform from the Bank of Ireland in September 2014. The servicing of the portfolio is delegated to Capita Asset Services and Homeloan Management Limited is the backup servicer on the transaction.

Portfolio Performance
The performance of the transaction is within DBRS’s expectations. Since the transaction closing, there has been no loss realized and no loan has been more than 3 full monthly repayments in arrears.

PD and LGD Assumptions
House prices in Ireland continued to improve since the transaction closing. As of March 2016, house prices have increased by 3.88% in Dublin and by 10.49% outside Dublin year over year. DBRS has updated the base-case PD to 1.12% and LGD to 2.36% for the remaining collateral pool in this rating review.

Credit Enhancement Available
The CE available to the notes has increased slightly as the transaction has deleveraged. As of 20 May 2016, the available CE increased to 26.14% for the Class A notes, to 12.22% for the Class B notes, to 8.73% for the Class C notes and to 6.42% for the Class D notes. The CE is provided through the subordinated notes and the General Reserve Fund, which is currently at its target level.

BNP Paribas, Dublin Branch is the Account Bank in this transaction. DBRS’s private rating on the Account Bank meets the Minimum Institution Rating criteria given the AAA (sf) rating assigned to the Class A 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.

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 these 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 “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 the rating actions include the investor reports from Deutsche Bank AG, London Branch and the loan-by-loan data from European Data Warehouse GmbH.

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.

The last rating action took place on 29 May 2015, when DBRS finalized the provisional ratings on the Class A notes at AAA (sf), the Class B notes at AA (sf), the Class C notes at A (sf) and the Class D notes at BBB (sf).

The lead responsibilities for this transactions 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 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 are 1.12% and 2.36%, respectively. At the AAA (sf) rating level, the corresponding PD is 17.86% and the LGD is 40.49%. At the AA (sf) rating level, the corresponding PD is 11.30% and the LGD is 25.91%. At the A (sf) rating level, the corresponding PD is 7.79% and the LGD is 19.55%. At the BBB (sf) rating level, the corresponding PD is 4.63% and the LGD is 12.08%.

-- 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 A 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 A 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 Class A notes would be expected to be at AAA (sf).

Class A notes 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 (sf)

Class B notes Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (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 AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class C notes Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (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 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 A (sf)

Class D notes Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (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 (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, Senior Vice President
Initial Rating Date: 12 May 2015
Initial Rating Committee Chair: Quincy Tang, Managing Director

Lead Surveillance Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Diana Turner, Managing Director

DBRS Ratings Limited
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The rating methodologies 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
-- Unified Interest Rate Model for European Securitisations
-- 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.