DBRS Confirms Rating on Thrones 2013-1 Plc

DBRS Ratings Limited (DBRS) confirmed its rating on the Class A Notes issued by Thrones 2013-1 Plc (the Issuer) at AAA (sf).

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the October 2017 payment date;
-- Updated Probability of Default (PD) , loss given default (LGD) and expected loss assumptions for the remaining collateral pool; and
-- Current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Thrones 2013-1 Plc is a securitisation of first-ranking U.K. non-conforming residential mortgages originated by Heritable Bank Plc. The mortgage portfolio is serviced by Mars Capital Finance Limited, with Homeloan Management Limited acting as the back-up servicer.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
As of October 2017, two-to-three-month arrears remained stable at 2.6% from October 2016. The 90+ delinquency ratio was at 3.6%, up from 2.5% in October 2016. Realised losses were low at 0.8%.

DBRS conducted a loan-by-loan analysis on the remaining pool and updated its base case assumptions for the PD rate and the LGD to 14.7% and 15.2%, respectively.

CREDIT ENHANCEMENT
As of the October 2017 payment date, CE to the Class A Notes was 54.3%, consisting of overcollateralization and the General Reserve Fund.

The General Reserve Fund covers senior fees, Class A interest and Class A principal via the Principal Deficiency Ledger (PDL). At the October 2017 payment date, the General Reserve Fund was at its target level of GBP 4.9 million.

Citibank N.A., London Branch holds the Transaction Account for the transaction. The DBRS private rating of Citibank N.A., London Branch complies with the Minimum Institution Rating, given the 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 British pound sterling unless otherwise noted.

The principal methodology applicable to the rating 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 investor reports provided by Citibank N.A., London Branch and loan-level data provided by 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 the Class A Notes at AAA (sf) following the publication of DBRS’s “European RMBS Insight: U.K. Addendum”.

The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 with 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 14.7% and 15.2%, respectively. At the AAA (sf) rating level, the corresponding PD is 42.7% and the LGD is 39.1%.
-- 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 the same at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain the same 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 remain the same at AAA (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 AAA (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: Clare Wootton, Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 31 July 2013

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
-- European RMBS Insight Methodology
-- European RMBS Insight: U.K. Addendum
-- Unified Interest Rate Model for European 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.