DBRS Confirms Rating on Class A Notes Issued by Temese Funding 2 PLC

DBRS Ratings Limited (DBRS) has today confirmed its rating on the Class A Notes issued by Temese Funding 2 PLC (the Issuer) at AAA (sf) and discontinued its rating on the New Class A Notes. The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal by the legal final maturity date.

The rating actions relate to a transaction amendment and purchase of an additional collateral portfolio funded via the issuance of New Class A Notes, New Class B Notes and New Class C Notes (together, the New Notes) on 18 May 2017, which were intended to become fully fungible with the existing Class A Notes, Class B Notes and Class C Notes (together, the Existing Notes). For more information, see DBRS’s press release entitled “DBRS Assigns Rating to Temese Funding 2 PLC” at http://dbrs.com/research/310743/dbrs-assigns-rating-to-temese-funding-2-plc.html.

The rating actions follow the exchange of each Temporary Global Note for its Permanent Global Note counterpart in accordance with the transaction documents. The Permanent Global Notes have the same ISIN as the Existing Notes and each class of New Notes has now formed a single consolidated series with the relevant class of Existing Notes.

Prior to their consolidation, the outstanding principal of the Class A Notes (ISIN: XS1126277588) was GBP 228.25 million and the outstanding principal of the New Class A Notes (ISIN: XS1611790608) was GBP 291.75 million. Both the Class A Notes and New Class A Notes were rated AAA (sf) for timely payment of interest and ultimate payment of principal by the legal final maturity date. After consolidation, the outstanding principal of the Class A Notes (ISIN: XS1126277588) has increased to GBP 520 million.

Notes:
All figures are in British pounds unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology.” 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 legal 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. These 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 commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

The sources of data and information used for these ratings include information provided by Investec Bank plc.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 19 May 2017, when DBRS confirmed the rating of AAA (sf) on the Class A Notes and assigned a rating of AAA (sf) to the New Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of 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 loans for the Issuer are 4.07% and 68.70%, respectively.
-- 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 of 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 Authority (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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 14 November 2014

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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 Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations

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