DBRS Confirms Ratings on Fastnet 14 and Fastnet 15

DBRS Ratings GmbH (DBRS) confirmed its AAA (sf) ratings on the respective Class A Notes (the Notes) issued by Fastnet Securities 14 DAC (Fastnet 14) and Fastnet Securities 15 DAC (Fastnet 15) (together, the Transactions).

The confirmations 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 on the remaining receivables;
-- Current available credit enhancement (CE) to the Notes to cover the expected losses at the AAA (sf) rating level.

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in August 2055.

The Transactions are static securitisations of Irish first-lien residential mortgages originated and serviced by Permanent TSB plc (PTSB). The collateral portfolios consist of mortgage loans granted primarily for the purchase of a primary residence, and were originally securitised in the Fastnet Securities 3 Limited transaction. Fastnet 14 had an initial portfolio balance of EUR 1,442.2 million while Fastnet 15 had an initial portfolio balance of EUR 1,426.7 million. The Transactions closed in June 2018 with no revolving period included.

PORTFOLIO PERFORMANCE
-- Fastnet 14: as of the June 2019 payment date, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.3% and 0.1% of the outstanding principal balance, respectively, while loans more than 90 days delinquent amounted to 0.1%. To date, there have been no repossessions or realised losses on the mortgage loans.

-- Fastnet 15: as of the June 2019 payment date, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.4% and 0.1% of the outstanding principal balance, respectively, while loans more than 90 days delinquent amounted to 0.3%. To date, there have been no repossessions or realised losses on the mortgage loans.

PORTFOLIO ASSUMPTIONS
While housing prices have continued to increase steadily outside of Dublin, with a 6.8% year-on-year gain as of March 2019, prices in Dublin have cooled down markedly in recent months, resulting in only a slight increase of 1.2% year on year. As of March 2019, house prices increased by 6.3% in Dublin and by 10.6% outside of Dublin year on year. The rise in house prices, particularly outside of Dublin, contributed to the reduction of the loan-to-value ratios and expected loss severities of the outstanding mortgages.

For Fastnet 14, DBRS updated its base case PD and LGD assumptions on the remaining receivables to 9.1% and 28.7%, respectively, from 10.3% and 33.2%, respectively. For Fastnet 15, the base case PD and LGD assumptions were updated to 9.3% and 28.8%, respectively, from 10.6% and 33.1%, respectively.

CREDIT ENHANCEMENT
CE to the Class A Notes in the Transactions are provided by the subordination of the Class Z notes and the General Reserve fund. As of the June 2019 payment date:
-- Fastnet 14: CE to the Class A Notes increased to 27.5% from 24.5% at closing.
-- Fastnet 15: CE to the Class A Notes increased to 27.0% from 24.5% at closing.

The Transactions benefit from a General Reserve fund and a Liquidity Reserve fund, providing credit support and liquidity support, respectively, funded at closing through a subordinated loan and together equal to 2.0% of the initial notes balance. As of the June 2019 payment date:
-- Fastnet 14: General Reserve at EUR 8.8 million and Liquidity Reserve at EUR 20.1 million.
-- Fastnet 15: General Reserve at EUR 8.9 million and Liquidity Reserve at EUR 19.6 million.

The Bank of New York Mellon SA/NV, Dublin Branch (BNYM-Dublin) acts as the account bank for the Transactions. Based on the DBRS private rating of BNYM-Dublin, 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 the account bank to be consistent with the ratings assigned to the Class A Notes in the Transactions, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

The Transactions were analysed in Intex DealMaker.

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. 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 is the first rating action since the Initial Rating Date.

The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.

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 14, the base case PD and LGD assumptions for the remaining collateral pool are 9.1% and 28.7%, respectively.

-- For Fastnet 15, the base case PD and LGD assumptions for the remaining collateral pool are 9.3% and 28.8%, 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 ratings would be expected to decrease to AA (high) (sf), ceteris paribus. If the PD increases by 50%, the ratings would be expected to decrease to AA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the ratings would be expected to decrease to A (sf).

Fastnet 14 Class A 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 A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

Fastnet 15 Class A 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 A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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 GmbH are subject to EU and US regulations only.

Lead Analyst: Daniel Rakhamimov, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Fastnet 14 Initial Rating Date: 22 June 2018
Fastnet 15 Initial Rating Date: 28 June 2018

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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.