DBRS Takes Rating Actions on Together Asset Backed Securitisation 1 Plc

DBRS Ratings Limited (DBRS) took the following rating actions on the notes issued by Together Asset Backed Securitisation 1 Plc (the Issuer):

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

The ratings on the Class A, Class B, Class C, Class D and Class E 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 transaction and are based on the following considerations:

-- Correction of an error in the application of the European RMBS Insight model.
-- Portfolio performance, in terms of delinquencies, defaults and net losses as of September 2018.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels.
-- A structural amendment to the transaction effective as of 19 October 2018.

Together Asset Backed Securitisation 1 Plc is a securitisation of first- and second-lien mortgage loans, both owner-occupied and buy-to-let, backed by residential properties located in the United Kingdom. The mortgages are originated and serviced by Blemain Finance Limited (BFL), Together Personal Finance Limited (TPFL) and Together Commercial Finance Limited (TCFL), which are subsidiaries of the Together Group (Together). Link Mortgage Services Limited (formerly Capita Mortgage Services Limited) acts as the standby servicer.

The increased expected loss assumptions reflect the correction of an error made in the application of the European RMBS Insight model for second-lien mortgage loans. At the time of the DBRS initial rating on 3 October 2017, DBRS’s asset analysis did not incorporate prior charge amounts into its assessment of aggregate borrower leverage. As a result, DBRS’s PD assumptions have been revised upwards to reflect the higher portfolio loan-to-value (LTV) ratios.

The increases in CE for the Class A to Class D notes since the DBRS initial rating have been sufficient to cover the increased losses at their current rating levels. The upgrade on the Class E notes reflects an increase in CE sufficient to cover losses at the BBB (low) (sf) rating level.

STRUCTURAL AMENDMENT
Establishment of an Additional Reserve Fund funded to the level of GBP 1.2 million via a subordinated loan provided by Together. Principal and interest payments on the subordinated loan will rank pari passu with the existing Class Z Notes. The Additional Reserve Fund is non-amortising, non-replenishable and covers principal shortfalls on the Class A to Class E Notes.

PORTFOLIO PERFORMANCE
As of September 2018, two- to three-month arrears represented 1.0% of the outstanding portfolio balance. The 90+ delinquency ratio was 1.1% and the cumulative loss ratio was 0.0%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 13.2% and 16.5% from 9.3% and 19.3%, respectively.

CREDIT ENHANCEMENT
As of the October 2018 payment date, CE to the Class A notes was 25.4%, up from 19.0% at the DBRS initial rating; to the Class B notes it was 20.2%, up from 15.0% at the DBRS initial rating; to the Class C notes it was 15.0%, up from 11.0% at the DBRS initial rating; to the Class D notes it was 9.7%, up from 7.0% at the DBRS initial rating and to the Class E notes it was 7.1%, up from 5.0% at the DBRS initial rating. CE consists of subordination of the junior notes.

The transaction benefits from a Reserve Fund which is funded to its target level of GBP 4.1 million and covers interest shortfall on the Class A to E notes unless a Reserve Fund Amortising Trigger Event occurs.

Elavon Financial Services DAC, U.K. Branch acts as the account bank for the transaction. The DBRS private rating of Elavon Financial Services DAC, U.K. Branch is consistent 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 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.

DBRS has conducted a review of the transaction legal documents provided in the context of the aforementioned amendment. The other transaction legal documents have remained unchanged since the most recent rating action and as such, a review has not been 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 these ratings include investor reports and loan-level data provided by Together.

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.

This rating was disclosed to Together and amended following that disclosure before being assigned.

The last rating action on this transaction took place on 3 October 2017, when DBRS finalised its provisional ratings on the notes.

The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.

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 13.2% and 16.5%, 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 fall to A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to fall to A (high) (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 fall to BBB (high) (sf).

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

Class B Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (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 A (low) (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 (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 C Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in LGD, expected rating of BBB (sf).
-- 25% increase in PD, expected rating of BBB (high) (sf).
-- 50% 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 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 D 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 (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 (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 E Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (high) (sf).
-- 50% increase in LGD, expected rating of BB (high) (sf).
-- 25% increase in PD, expected rating of BB (high) (sf).
-- 50% increase in PD, expected rating of BB (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 and 25% increase in LGD, expected rating of BB (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (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: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 12 September 2017

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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
-- 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.