DBRS Confirms and Upgrades Notes on Towd Point Mortgage Funding 2016-Vantage1 Plc

DBRS Ratings Limited (DBRS) took rating actions on the Class A1, A2, B, C, D, E and F Notes (the Rated Notes) issued by Towd Point Mortgage Funding 2016-Vantage1 Plc (Vantage1) as follows:

-- Class A1 Notes confirmed at AAA (sf) for the full and timely payment of interest and the full and ultimate payment of principal.
-- Class A2 Notes confirmed at AAA (sf) for the full and timely payment of interest and the full and ultimate payment of principal.
-- Class B Notes confirmed at AA (sf) for the full and ultimate payment of interest (disregarding any Net WAC Additional Amounts) and principal.
-- Class C Notes upgraded to A (high) (sf) from A (sf) for the full and ultimate payment of interest (disregarding any Net WAC Additional Amounts) and principal.
-- Class D Notes upgraded to BBB (high) (sf) from BBB (low) (sf) for the full and ultimate payment of interest (disregarding any Net WAC Additional Amounts) and principal.
-- Class E Notes upgraded to BBB (low) (sf) from BB (sf) for the full and ultimate payment of principal.
-- Class F Notes confirmed at B (sf) for the full and ultimate payment of principal.

The rating actions followed an annual review of the transaction and were based on the following analytical considerations, as described more fully below.

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

Vantage1, which closed in December 2016, is a securitisation of non-conforming mortgages secured over residential properties and originated by various specialised lenders in the U.K. The mortgages were later purchased by Promotoria (Vantage) Limited in 2015. Cerberus Europeans Residential Holdings B.V. acquired this portfolio of mortgages and sold it to Vantage1 on the transaction closing date. Pepper (U.K.) Limited is the Servicer of the mortgage portfolio.

At the transaction closing, there were loans in arrears. In addition, 41.7% of the loans had gone through restructuring arrangements. As of 31 October 2017, the loans more than 90 days in arrears were 16.6% of the outstanding portfolio balance, down from 22.0% at the transaction closing. The decline in arrears was partially driven by the continuing loan restructuring, which increased to 49.3% of the outstanding portfolio. At the same time, 1.8% of the portfolio balance at the transaction closing went under repossession while 0.4% of losses realized. The performance is within DBRS’s expectations. DBRS maintained its base case PD and LGD assumptions on the transaction at 45.9% and 21.6%, respectively.

The CE to the Rated Notes has increased as the transaction is deleveraging. As of the November 2017 payment date, the CE to the Class A1, A2, B, C, D, E and F Notes increased to 49.3%, 44.9%, 38.1%, 30.4%, 25.1%, 19.1%, and 11.0% from 45.0%, 41.0%, 34.8%, 27.8%, 22.9%, 17.4%, and 10.0%, respectively. The sources of CE to each Rated Notes are its subordinate Notes. The increase in CE prompted the rating actions herein.

Elavon Financial Services DAC, UK Branch, is the Account Bank in the transaction and has a DBRS private rating that complies with the Account Bank Minimum Institution Rating criteria, given the ratings assigned to the Class A1 and A2 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 transactions in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating actions.

Other methodologies referenced in the 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 these rating actions include the investor reports and the loan- by-loan data provided by U.S. Bank Trustees 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 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 took place on 14 December 2016, when DBRS finalized its ratings on the Rated Notes.

The lead analyst responsibilities for this transaction have been transferred to Kevin Ma.

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 to the parameters used to determine the rating (the Base Case):

-- The base case PD and LGD assumptions for the remaining collateral pool are 45.9% and 21.6%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 77.6% and 46.8%, respectively. At the AA (sf) rating level, the corresponding PD and LGD are 74.8% and 42.9%, respectively. At the A (high) (sf) rating level, the corresponding PD and LGD are 71.4% and 38.4%, respectively. At the BBB (high) (sf) rating level, the corresponding PD and LGD are 65.1% and 32.6%, respectively. At the BBB (low) (sf) rating level, the corresponding PD and LGD are 62.1% and 29.3%, 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 on the Class A1 Note would be expected to be at A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A1 Note would be expected to be at AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A1 Note would be expected to be at BBB (sf).

Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (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 BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (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)
-- 50% increase in PD, expected rating of BBB (low) (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)

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

Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in LGD, expected rating of B (high) (sf)
-- 25% increase in PD, expected rating of BB (sf)
-- 50% increase in PD, expected rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of Below B (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 Below B (sf)
-- 50% increase in LGD, expected rating of Below B (sf)
-- 25% increase in PD, expected rating of Below B (sf)
-- 50% increase in PD, expected rating of Below 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 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: Kevin Ma, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 5 December 2016

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 these transactions can be found at: http://www.dbrs.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- European RMBS Insight Methodology
-- European RMBS Insight: U.K. Addendum
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.