DBRS Confirms Ratings of Be-Spoke Loan Funding DAC Following Amendments

DBRS Ratings Limited (DBRS) confirmed its ratings on the Senior Notes and the Mezzanine Notes (together, the Rated Notes) of Be-Spoke Loan Funding DAC (the Borrower) as follows:

-- Senior Notes at AA (low) (sf)
-- Mezzanine Notes at BB (sf)

The rating on the Senior Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the scheduled maturity date in September 2025. The timely payment of interest does not include the Senior Note Step-up Interest Amount of 2%. The Senior Note Step-up Interest Amount is only paid to the extent the proceeds are available and is always paid junior in the priority of payments. The rating on the Mezzanine Notes addresses the ultimate payment of interest and principal payable on or before the scheduled maturity date.

The confirmations follow a review of the transaction based on the amendments that became effective on 20 December 2018. The amendments include changes to the capital structure (matrix), changes to the industry and obligor concentration limits and Increase of Mezzanine Note margin from 5.05% to 10.0%.

The Borrower is a designated activity company incorporated under the laws of the Republic of Ireland. The transaction is a direct lending warehouse facility set up as a cash flow securitisation with the purpose to fund the purchase of a portfolio of loans granted by Be-Spoke Capital (Ireland) Limited (the Originator) to Spanish small and medium-sized enterprises.

As of 3 December 2018, the transaction portfolio consisted of collateral obligations totalling EUR 191 million that were extended to 50 obligors based in Spain and all collateral quality and portfolio concentration tests are in compliance.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating CLOs and CDOs of Large Corporate Credit”.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

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: https://www.dbrs.com/research/333487/rating-sovereign-governments.

The sources of data and information used for these ratings include the Arranger, Natwest Markets and the Originator, Be-Spoke Capital (Ireland) 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 not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS was supplied with one or more third-party assessments. DBRS applied additional cash flow stresses in its 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 1 November 2018, when DBRS confirmed the ratings of the Rated Notes and removed the Rated Notes from their Under Review with Developing Implications (UR Dev.) status.

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”):

Drawdown Structure:
For the first drawing point in the matrix, the warehouse notional amount is expected to be EUR 190 million.
--An increase in the Risk Score by 15% would lead to a downgrade of the Senior Notes to A (low) (sf) and a downgrade of the Mezzanine Notes to B (sf).
-- An increase in the Risk Score by 30% would lead to a downgrade of the Senior Notes to BBB (sf) and a downgrade of the Mezzanine Notes to B (high) (sf).

For the last point in the matrix, the warehouse notional amount is expected to be EUR 290 million.
--An increase in the Risk Score by 15% would lead to a downgrade of the Senior Notes to A (sf) and a downgrade of the Mezzanine Notes to B (high) (sf).
-- An increase in the Risk Score by 30% would lead to a downgrade of the Senior Notes to BBB (high) (sf) and a downgrade of the Mezzanine Notes to 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: Mudasar Chaudhry, Vice President
Rating Committee Chair: Jerry van Koolbergen, Managing Director
Initial Rating Date: 2 October 2017

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.

-- Rating CLOs and CDOs of Large Corporate Credit
-- Legal Criteria for European Structured Finance Transactions
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- 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.