DBRS Takes Rating Actions on Fastnet Securities 10 and 12

DBRS Ratings Limited (DBRS) took the following rating actions on the notes issued by Fastnet Securities 10 Limited (Fastnet 10) and Fastnet Securities 12 Designated Activity Company (Fastnet 12):

FASTNET 10
-- Class A1 confirmed at AAA (sf)
-- Class A2 upgraded to AAA (sf)
-- Class A3 upgraded to AA (high) (sf)

FASTNET 12
-- Class A confirmed at AAA (sf)
-- Class B confirmed at AA (high) (sf)
-- Class C upgraded to AA (sf) from AA (low) (sf)

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

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

-- Portfolio performance in terms of delinquencies and defaults.
-- Probability of default rate (PD), loss given default (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.

The originator and the servicer in both transactions is permanent tsb p.l.c (PTSB, rated BB/R-4 by DBRS). Fastnet 10 closed in November 2010 and Fastnet 12 closed in November 2016. Both transactions are backed by portfolios of Irish first-lien residential mortgages.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
As of 31 July 2018, loans more than 90 days in arrears represented 0.6% of the outstanding Fastnet 10 portfolio and 0.1% of the outstanding Fastnet 12 portfolio. Neither transaction has losses realised.

As of July 2018, house prices in Ireland have increased further by 7.2% inside Dublin and by 13.7% outside Dublin year-over-year. The improvement in the house prices has reduced the loan-to-value ratios and expected loss severities of the outstanding mortgages. DBRS updated the base case PD and LGD assumptions on the remaining portfolio to 11.1% and 37.2% from 13.6% and 36.7%, respectively, for Fastnet 10, and to 4.1% and 14.8% from 7.0% and 22.2%, respectively, for Fastnet 12.

CREDIT ENHANCEMENT
Both transactions continue to deleverage resulting in the increase of CE available to the notes. As of the September 2018 payment date, CE to Fastnet 10 Class A1, A2, and A3 notes has increased to 83.5%, 57.1%, and 37.2%, respectively. As of the July 2018 payment date, CE to Fastnet 12 Class A, B, and C notes has increased to 26.1%, 19.2%, and 14.5%, respectively.

Deutsche Bank AG, London Branch is the Account Bank in Fastnet 10. Elavon Financial Services DAC, UK Branch is the Account Bank in Fastnet 12. Both entities’ private ratings or private reference ratings, being one notch below the Long-Term Critical Obligations Rating, if available, are consistent with the Account Bank Minimum Institution Rating criteria, given the ratings assigned to the Class A1 or A notes, 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: “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 legal documents have remained unchanged since the most recent rating action.

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 ratings include the investor reports provided by PTSB and the loan-by-loan data from European Data Warehouse GmbH.

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

At the time of the initial ratings, 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 Fastnet 10 Fastnet 12 took place on 6 October 2017, when DBRS confirmed Fastnet 10 Class A1, A2 and A3 at AAA (sf), AA (high) (sf), and AA (sf), respectively; confirmed Fastnet 12 Class A at AAA (sf) and upgraded Fastnet 12 Class B and C to AA (sf) and A (high) (sf), respectively.
The lead analyst responsibilities for these transactions have been transferred to Alfonso Candelas.

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):

-- For Fastnet 10, the base case PD and LGD assumptions for the remaining collateral pool are 11.1% and 37.2%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 37.6% and 70.2%, respectively. At the AA (high) (sf) rating level, the corresponding PD and LGD are 34.7% and 62.5%, respectively.

-- For Fastnet 12, the base case PD and LGD assumptions for the remaining collateral pool are 4.1% and 14.8%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 27.2% and 52.0%, respectively. At the AA (high) (sf) rating level, the corresponding PD and LGD are 23.9% and 41.7%, respectively. At the AA (sf) rating level, the corresponding PD and LGD are 20.4% and 39.7%, 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 Fastnet 10 Class A1 would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on Fastnet 10 Class A1 would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on Fastnet 10 Class A1 would be expected to be at AA (high) (sf).

Fastnet 10 Class A1 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)

Fastnet 10 Class A2 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 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 (sf)

Fastnet 10 Class A3 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 (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 A (high) (sf)

Fastnet 12 Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AAA (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 (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Fastnet 12 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 (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 (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)

Fastnet 12 Class C Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (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 A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (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: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Fastnet 10 Initial Rating Date: 27 November 2014
Fastnet 12 Initial Rating Date: 15 September 2016

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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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.