DBRS Confirms and Upgrades Dilosk RMBS No.1 Designated Activity Company

DBRS Ratings Limited (DBRS) took the following rating actions on the bonds issued by Dilosk RMBS No.1 Designated Activity Company (Dilosk 1; the Issuer):

-- Class A confirmed at AAA (sf)
-- Class B confirmed at AA (high) (sf)
-- Class C upgraded to AA (sf) from A (high) (sf)
-- Class D upgraded to AA (low) (sf) from BBB (high) (sf)

The ratings on the Class A and Class B notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The ratings on the Class C and Class D notes address the ultimate payment of interest and principal on or before the legal final maturity date.

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

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

Dilosk 1 closed in May 2015 and is a securitisation of the first-ranking Irish residential mortgages originated by ICS Building Society, which was previously part of the Bank of Ireland Group. Dilosk Designated Activity Company acquired the mortgage portfolio, the ICS brand and the mortgage distribution platform from the Bank of Ireland in September 2014. The servicing of the portfolio is delegated to Link Asset Service, formerly Capita Asset Services, and Homeloan Management Limited is the backup servicer on the transaction.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The transaction’s collateral portfolio continues to perform well and within DBRS’s expectations. As of end of January 2018, loans more than 90 days arrears increased to 0.16% of the outstanding portfolio balance from 0.04% at the last review. There have been no losses realised on the collateral portfolio since the transaction’s closing.

DBRS received the loan-by-loan modification information. There were very few loans that underwent modification or forbearance and DBRS applied additional stresses on those loans in its credit analysis. The base case PD and LGD assumptions for the remaining outstanding collateral portfolio are maintained at 1.1% and 2.4%, respectively, in this rating review.

CREDIT ENHANCEMENT
As of the February 2018 payment date, credit enhancement to the Class A notes was 32.9%, up from 22.5% at the DBRS initial rating. Credit enhancement to the Class B notes was 15.4%, up from 10.5% at the DBRS initial rating. Credit enhancement to the Class C notes was 11.0%, up from 7.5% at the DBRS initial rating. Credit enhancement to the Class D notes was 8.1%, up from 5.5% at the DBRS initial rating. The credit enhancement is provided through the subordinated notes and the General Reserve Fund, which is currently at its target level.

BNP Paribas Dublin Branch acts as the account bank for the transaction. The DBRS private rating of BNP Paribas Dublin Branch is consistent with the Minimum Institution Rating, given the rating assigned to the Class A, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings 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 “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 ratings include investor reports provided by Deutsche Trustee Company Limited, and loan-level data provided by the European DataWarehouse GmbH.

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 25 May 2017, when DBRS confirmed its rating on the Class A notes and upgraded its ratings of the Class B, Class C, Class D notes to AA (high) (sf), A (high) (sf) and BBB (high) (sf), respectively.

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 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 loans for the Issuer are 1.1% and 2.4%, 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 PD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to remain at AAA (sf).

Class A 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)

Class B 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)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class C Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (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 AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class D Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: Kevin Ma, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 12 May 2015

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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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions

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.