DBRS Morningstar Takes Rating Actions on Fastnet Securities 10 and 12

DBRS Ratings GmbH (DBRS Morningstar) 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 confirmed at AAA (sf)
-- Class A3 upgraded to AAA (sf) from AA (high) (sf)

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

The ratings on the notes in Fastnet 10 address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in August 2053.

The ratings on the Class A and Class B notes in Fastnet 12 address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in August 2056. The rating on the Class C notes addresses the ultimate payment of interest and 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, defaults and losses;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

Fastnet 10 and Fastnet 12 are securitisations of residential mortgage loans secured by first-ranking liens on properties in the Republic of Ireland, originated and serviced by permanent tsb plc (PTSB). Fastnet 10 closed in November 2014 with an initial portfolio balance of EUR 2.07 billion, while Fastnet 12 closed in October 2016 with an initial portfolio balance of EUR 562.0 million.

PORTFOLIO PERFORMANCE
-- Fastnet 10: as of 31 August 2019, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.5% and 0.1% of the outstanding principal balance, respectively, while loans more than 90 days delinquent amounted to 0.3%. Loans currently in repossession totalled 0.4% of the outstanding principal balance. The cumulative realised losses have increased to 0.1% of the initial portfolio balance from zero one year ago.

-- Fastnet 12: as of 31 August 2019, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.3% and 0.04% 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.

PORTFOLIO ASSUMPTIONS
For Fastnet 10, DBRS Morningstar updated its base case PD and LGD assumptions on the remaining receivables to 11.4% and 37.2%, respectively. For Fastnet 12, the base case PD and LGD assumptions were updated to 4.3% and 13.2%, respectively.

CREDIT ENHANCEMENT
Credit enhancement to the rated notes in the transactions is provided by the subordination of the respective junior obligations and the general reserve fund. Both transactions continue to deleverage steadily, resulting in increased credit enhancement available to the rated notes.

As of the September 2019 payment date, credit enhancement to Class A1, Class A2 and Class A3 notes in Fastnet 10 has increased to 96.2%, 65.8% and 43.1%, respectively, from 83.5%, 57.1% and 37.2%, respectively, one year ago.

As of the July 2019 payment date, credit enhancement to the Class A, Class B and Class C notes in Fastnet 12 has increased to 32.0%, 23.8% and 18.2%, respectively, from 26.1%, 19.2% and 14.5%, respectively, one year ago.

The transactions benefit each from a general reserve fund and a liquidity reserve fund, funded through a subordinated loan granted at closing by PTSB, which respectively provide credit support and liquidity support to the transactions.

In Fastnet 10, the general reserve fund is non-amortising and as of the September 2019 payment date was at its target balance of EUR 41.4 million, equal to 3.0% of the outstanding portfolio balance. The liquidity reserve fund is amortising with a target balance equal to 2.5% of the aggregate outstanding Class A notes balance, and as of the September 2019 payment date was at its target balance of EUR 20.9 million. Releases from the liquidity reserve fund form part of the available principal proceeds used to amortise the notes.

In Fastnet 12, the general reserve fund is amortising with a target balance equal to 2.5% of the initial portfolio balance minus the liquidity reserve fund, and as of the July 2019 payment date was at its target balance of EUR 5.8 million. The liquidity reserve fund is amortising with a target balance equal to 2.5% of the outstanding rated notes balance, and as of the July 2019 payment date was at its target balance of EUR 8.2 million. The two reserve funds always equal EUR 14.1 million in aggregate.

Deutsche Bank AG, London branch acts as the account bank for Fastnet 10, while Elavon Financial Services DAC, UK branch acts as the account bank for Fastnet 12. Based on the DBRS Morningstar private ratings of both entities, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, DBRS Morningstar considers the risks arising from the exposure to the account banks to be consistent with the ratings assigned to the rated notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction structures were analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”. DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transactions in accordance with the principal methodology.

A review of the transactions legal documents was not conducted as the legal documents have remained unchanged since the most recent rating actions.

Other methodologies referenced in these transactions 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 “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include investor and servicer reports provided by PTSB and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial ratings, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on these transactions took place on 5 October 2018. For Fastnet 10, DBRS Morningstar confirmed the rating of the Class A1 notes at AAA (sf) and upgraded the ratings of the Class A2 notes to AAA (sf) and Class A3 notes to AA (high) (sf). For Fastnet 12, DBRS Morningstar confirmed the ratings of the Class A and Class B notes at AAA (sf) and AA (high) (sf), respectively, and upgraded the rating on the Class C notes to AA (sf).

The lead analyst responsibilities for these transactions have been transferred to Daniel Rakhamimov.

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (the Base Case):

-- DBRS Morningstar expected a lifetime base case PD and LGD for the pools 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.

-- For Fastnet 10, the base case PD and LGD assumptions for the remaining collateral pool are 11.4% and 37.2%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 37.8% and 70.0%, respectively.

-- For Fastnet 12, the base case PD and LGD assumptions for the remaining collateral pool are 4.3% and 13.2%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 27.3% and 48.9%, respectively. At the AA (high) (sf) rating level, the corresponding PD and LGD are 24.1% and 38.6%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating of the Class A1 notes in Fastnet 10 would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A1 notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A1 notes would be expected to remain at AAA (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 AAA (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 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 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 AA (high) (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 12 Class A 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 12 Class B 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 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 (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 C 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 (sf)
-- 50% increase in PD, expected rating of AA (low) (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 (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 Morningstar 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 10 Initial Rating Date: 27 November 2014
Fastnet 12 Initial Rating Date: 15 September 2016

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of these transactions 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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions

A description of how DBRS Morningstar 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 these credits or on this industry, visit www.dbrs.com or contact us at [email protected].