DBRS Takes Rating Actions on Two Fastnet Securities Transactions

DBRS Ratings Limited (DBRS) took the following rating actions on Fastnet Securities 6 Limited (Fastnet 6) and Fastnet Securities 11 Designated Activity Company (Fastnet 11):

Fastnet 6:
-- Class A3 upgraded to AAA (sf) from AA (high) (sf)

Fastnet 11:
-- Class A1 confirmed at AAA (sf)
-- Class A2 confirmed at AAA (sf)
-- Class A3 upgraded to AA (high) (sf) from AA (sf)

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal
final maturity date (December 2050 for Fastnet 6; August 2056 for Fastnet 11).

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

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

The seller, originator and servicer in the transactions is permanent tsb p.l.c (PTSB; rated BB (high) with a Positive trend / R-3 by DBRS). Fastnet 6 closed in November 2008, and Fastnet 11 closed in March 2016. Both transactions are backed by portfolios of Irish first-lien residential mortgages.

FASTNET 6

PORTFOLIO PERFORMANCE
As of 30 November 2018, the portfolio performance continued to improve as the loans more than 90 days in arrears and the loans more than 360 days in arrears decreased to 2.5% and 2.0%, respectively, of the outstanding portfolio balance from 11.7% and 9.7%, respectively, 12 months prior. The decrease in arrears was primarily driven by repurchases of non-performing loans carried out by the seller in the first half of 2018. The cumulative realised losses as a percentage of the portfolio balance at the transaction closing remained at 0.01%.

PORTFOLIO ASSUMPTIONS
Ireland’s house prices continued to recover across the country. As of October 2018, house prices increased by 6.3% within Dublin and by 10.6% outside of Dublin year-on-year. The improvement in house prices contributed to the reduction of the loan-to-value ratios and expected loss severities of the outstanding mortgages. Furthermore, the transaction was positively affected by the repurchase of a large pool of non-performing loans by the seller in the first half of 2018. DBRS updated its base case PD and LGD assumptions on the remaining portfolio to 14.0% and 32.9%, respectively, from 23.5% and 38.6%, respectively.

CREDIT ENHANCEMENT
As the transaction continued to deleverage, CE to the Class A3 notes increased to 65.7% as of the December 2018 payment date. The CE is provided via the subordinated notes and a non-amortising reserve fund, currently at its target level of EUR 26.4 million. The increased CE and the updated portfolio assumptions prompted the upgrade of the rating on the Class A3 notes.

FASTNET 11

PORTFOLIO PERFORMANCE
The transaction’s performance continues to evolve according to DBRS’s expectations. As of 30 November 2018, the loans more than 90 days in arrears decreased to 0.4% of the portfolio outstanding balance from 0.8% 12 months prior. The loans more than 360 days in arrears represented 0.04% of the outstanding balance.

PORTFOLIO ASSUMPTIONS
Similarly to Fastnet 6, the transaction benefited from increased house prices in Ireland and repurchase activities by the seller, albeit the latter to a smaller extent because of a lower share of delinquent loans in the pool. DBRS updated the PD and LGD assumptions on the remaining portfolio to 7.3% and 34.0%, respectively, from 7.9% and 35.3%, respectively.

CREDIT ENHANCEMENT
The CE available to the Class A1, A2 and A3 notes increased to 25.5%. The CE is provided via the subordinated notes taking into consideration a pro rata principal deficiency ledger allocation as well as a non-amortising reserve fund, currently at its target level of EUR 58.2 million. The increased CE and the updated portfolio assumptions prompted the upgrade of the Class A3 notes.

BNP Paribas Securities Services, London Branch (BPSS) acts as the account bank for Fastnet 6. The Bank of New York Mellon, London Branch (BNY) acts as the account bank for Fastnet 11. Based on the DBRS public rating of BNY at AA, the DBRS private rating of BPSS, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, DBRS considers the risk arising from the exposure to BPSS and BNY to be consistent with the ratings assigned to the senior notes in both transactions, 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 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 investor reports provided by PTSB and 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. For Fastnet 6, the third-party assessments were as of the closing date. 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 6 took place on 12 January 2018, when DBRS confirmed its rating of Class A2 at AAA (sf) and upgraded its rating of Class A3 to AA (high) (sf). The last rating action on Fastnet 11 took place on 12 January 2018, when DBRS confirmed its ratings of Class A1 and Class A2 at AAA (sf) and Class A3 at AA (sf).

The lead analyst responsibilities for this transaction have been transferred to Nathan Levy.

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 6, the base case PD and LGD assumptions for the remaining collateral pool are 14.0% and 32.9%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 38.6% and 67.4%, respectively.

-- For Fastnet 11, the base case PD and LGD assumptions for the remaining collateral pool are 7.3% and 34.0%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 29.6% and 65.0%, respectively. At the AA (high) (sf) rating level, the corresponding PD and LGD are 26.8% and 57.1%, 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 6 Class A3 would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on Fastnet 6 Class A3 would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on Fastnet 6 Class A3 would be expected to remain at AAA (sf).

Fastnet 6 Class A3 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)

Fastnet 11 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 11 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 AA (high) (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 11 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 (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)

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: Nathan Levy, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Fastnet 6 Initial Rating Date: 21 January 2015
Fastnet 11 Initial Rating Date: 24 March 2016

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor
London
EC3M 3BY
United Kingdom
Registered and incorporated under the laws of England and Wales: Company No. 7139960

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Legal Criteria for European Structured Finance Transactions
-- 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.