DBRS Takes Rating Actions on Thrones 2014-1 plc

DBRS Ratings Limited (DBRS) took the following rating actions on the Class A, Class B, Class C, Class D, Class E and Class F Notes (together, the Notes) issued by Thrones 2014-1 plc (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AA (high) (sf) from AA (sf)
-- Class C Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes confirmed at BB (sf)
-- Class F Notes confirmed at B (sf)

The rating actions reflect an annual review of the transaction and are based on the following analytical considerations:

-- The overall portfolio performance as of the November 2017 payment date;
-- Updated probability of default (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral pool;
-- The current levels of credit enhancement (CE) available to the Notes to cover the expected losses assumed in line with their respective rating levels.

The ratings assigned to the Class A, B, C and F Notes address the timely payment of interest and ultimate repayment of principal by the Final Maturity Date in November 2049. The ratings assigned to the Class D and E Notes address ultimate payment of interest and ultimate repayment of principal by the Final Maturity Date in November 2049.

Thrones 2014-1 plc is a securitisation of first-ranking U.K. non-conforming residential mortgages originated by Edeus Mortgages Creators Limited and Victoria Mortgage Funding Limited. The mortgage portfolio is serviced by Mars Capital Finance Limited, with Homeloan Management Limited acting as the back-up servicer.

PORTFOLIO PERFORMANCE
As of the November 2017 payment date, 30-day to 60-day delinquencies represented 3.3% of the outstanding portfolio balance; 60-day to 90-day delinquencies represented 1.4%; and delinquencies greater than 90 days represented 3.9% of the outstanding discounted balance. Realised losses stand at 0.3% of the initial portfolio balance.
PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its base case PD and LGD assumptions on the outstanding portfolio to 21.5% and 22.7 %, respectively.

CREDIT ENHANCEMENT
CE for the Notes is provided by overcollateralisation, subordination of the respective junior obligations and the general reserve fund. CE for the Class A Notes increased to 56.8% in November 2017 from 41.0% at closing in August 2014; CE for the Class B Notes increased to 42.8% from 30.5%; CE for the Class C Notes increased to 30.2% from 21.0%; CE for the Class D Notes increased to 20.2% from 13.5%;
CE for the Class E Notes increased to 12.9% from 8.0%; while CE for the Class F Notes increased to 10.9% from 6.5%.

A non-amortising general reserve fund was funded at closing to GBP 4.6 million using half of the proceeds from a subordinated loan – equal to 1.5% of the initial portfolio balance. It was topped up using excess spread to its non-amortising target of GBP 9.8 million at which it has remained. A non-amortising liquidity reserve was funded at closing to GBP 4.6 million using the other half of the proceeds from the subordinated loan. It is available to cover shortfalls in senior fees and interest on the most senior class of notes and has remained at this non-amortising target since closing.

Citibank N.A., London Branch acts as the Account Bank for the transaction, holding both the collections and the reserve funds. DBRS’s private rating of Citibank N.A., London Branch complies with the minimum institution rating, given the ratings assigned to the Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings is: “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 legal documents related to a proposed amendment to the Market Portfolio Purchase Agreement and Security Deed was conducted in September 2017. The other transaction legal documents have remained unchanged since the most recent rating action and a review was not conducted.

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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf

The sources of data and information used for this rating include reports and loan-level data provided by Citibank N.A., London Branch and Mars Capital Finance Limited.

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 this rating 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 20 December 2016, when DBRS confirmed its rating on all classes of Notes.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 Base Case PD and LGD for the portfolio 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 assets of receivables are 21.5% and 22.7%, respectively. At the AAA (sf) rating level this corresponds to a PD of 52.8% and an LGD of 50.0%.

For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to decrease to AA (low) (sf), ceteris paribus.

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)
-- 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, 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 (low) (sf)

Class B Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (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 (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

Class C Notes risk sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD, expected rating of BBB (high) (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 BB (high) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

Class D Notes risk sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)

Class E Notes risk sensitivity:
-- 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD, expected rating of BB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of B (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (sf)
-- 50% increase in PD, expected rating of BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of below B (sf)

Class F Notes risk sensitivity:
-- 25% increase in LGD, expected rating of B (sf)
-- 50% increase in LGD, expected rating of B (sf)
-- 25% increase in PD, expected rating of B (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of below B (sf)
-- 50% increase in PD, expected rating of B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of below B (sf)

For further information on DBRS historical 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: Vito Natale, Senior Vice President
Initial Rating Date: 23 July 2014

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

-- Master European Structured Finance Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- European RMBS Insight Methodology and European RMBS Insight: U.K. Addendum

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