DBRS Assigns AA (low) Rating on Bank of Ireland Mortgage Bank Mortgage Covered Securities Programme Series 55

DBRS Ratings Limited (DBRS) has today assigned a rating of AA (low) to the Series 55 Mortgage Covered Securities (Series 55) issued under the Bank of Ireland Mortgage Bank (BOIMB or the Issuer) EUR 15,000,000,000 Mortgage Covered Securities Programme (the Programme). Series 55 is a EUR 500 million floating-rate bond indexed to Euribor 3 months +0.5% maturing on 21 June 2023. Concurrently, DBRS has discontinued the ratings on Series 32, repaid in full in December 2015 and on Series 4 and 30, repaid in full in February 2016. DBRS has also confirmed the AA (low) ratings on the other outstanding series. Following the issuance of Series 55, there are 38 series of covered bonds outstanding, for a total amount of EUR 7.19 billion.

The AA (low) rating assigned reflects the following analytical considerations:

-- A Covered Bonds Attachment Point (CBAP) of “A”, being the Long-Term Critical Obligations Rating of Bank of Ireland. BOI is the Reference Entity for the Programme.
-- A legal and structuring framework (LSF) assessment of Adequate associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of BBB (low) being the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-implied likelihood (LSF-L) of A (high).
-- A one-notch uplift for good recovery prospects.
-- A level of overcollateralisation (OC) of 32.0% that DBRS gives credit to, being the minimum observed OC level during the past 12 months adjusted by a scaling factor of 0.85.

The transaction was modelled using the DBRS European Covered Bond Cash Flow Model. The main assumptions focused on the timing of defaults, recoveries of the assets, interest rate stresses and market value spreads to calculate liquidation values on the cover pool (CP).

Everything else being equal, a downgrade of the CBAP by one notch would lead to a downgrade of the covered bonds rating by one notch. In addition, the ratings of the Programme would be downgraded if any of the following occurred: (1) the CPCA were downgraded below BBB (low), (2) the sovereign rating of the Republic of Ireland was downgraded below the CBAP, (3) the LSF Assessment associated with the Programme were downgraded; (4) the quality and consistency of the CP were no longer sufficient to support a one-notch uplift for good recovery prospects, (5) the relative amortisation of the CB and CP were to move adversely or (6) volatility in the financial markets were to cause the currently estimated market value spreads to be increased.

The total outstanding amount of securities under the Programme after the issuance is EUR 7.19 billion, while the aggregate balance of the CP is EUR 11.96 billion (as of March 2016, including mortgages and substitution assets), resulting in a total OC of 66.5%. Of the Mortgage Covered Securities outstanding, 79.8% pay a fixed coupon. The interest rate mismatch in the Programme is hedged with BOI.

As of the end of March 2016, the CP included EUR 10.95 billion first-lien residential mortgages and EUR 1.02 billion substitution assets. The weighted-average (WA) current loan-to-value (LTV) of the mortgages was 57.14%, while the WA-indexed LTV was 72.68%. The WA seasoning was 9.1 years and the WA remaining term was 18.7 years.
Fixed-rate mortgages in the CP accounted for 12.2% of the balance, while tracker and variable mortgages represented 87.8% of the CP balance. All CP assets and all Mortgage Covered Securities are denominated in euros. As such, investors are not currently exposed to any foreign exchange risk.

For further information on the Bank of Ireland ACS Programme, please refer to the rating report available on www.dbrs.com.

DBRS has assessed the LSF related to the Programme as Adequate, according to its rating methodology. For more information, please refer to DBRS commentaries “DBRS Assigns LSF Assessment to Irish Covered Bonds” and “Irish Covered Bonds: Legal and Structuring Framework Review,” both available at www.dbrs.com

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Rating European Covered Bonds” (March 2016). This can be found at http://www.dbrs.com/about/methodologies. In DBRS’s opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, an asset analysis and an operational risk review were not conducted. A review of the legal documents was limited to the final terms of the new issuance.

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

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

The sources of information used for these ratings include stratification data on the CP as well as information on the economic terms of the new issuance provided by the Issuer.

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 15 December 2015, when DBRS assigned an AA (low) rating to Series 54, and confirmed the ratings of all outstanding series.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

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: 18 April 2012
Initial Rating Committee Chair: Erin Stafford, Managing Director

Lead Surveillance Analyst: Vito Natale, Senior Vice President
Rating Committee Chair: Erin Stafford, Managing Director

DBRS Ratings Limited
20 Fenchurch Street 31st Floor,
London
EC3M 3BY 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

-- Rating European Covered Bonds
-- Rating European Covered Bonds Addendum: Market Value Spreads Range (Midpoints)
-- Critical Obligations Rating Criteria
-- Global Methodology for Rating Banks and Banking Organisations
-- DBRS Criteria: Support Assessments for Banks and Banking Organisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- The Effect of Sovereign Risk on Securitisations in the Euro Area
-- Sovereign Ratings Provide a Benchmark for other DBRS Credit Ratings

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.