DBRS Morningstar Confirms Ratings on Two Together Asset Backed Securitisation Transactions

DBRS Ratings Limited (DBRS Morningstar) confirmed its ratings on the notes issued by Together Asset Backed Securitisation 1 Plc (TABS 1) and Together Asset Backed Securitisation 2018-1 (TABS 2018-1) as follows:

TABS 1
-- Class A notes confirmed at AAA (sf)
-- Class B notes confirmed at AA (sf)
-- Class C notes confirmed at A (high) (sf)
-- Class D notes confirmed at BBB (sf)
-- Class E notes confirmed at BBB (low) (sf)

TABS 2018-1
-- Class A notes confirmed at AAA (sf)
-- Class B notes confirmed at AA (high) (sf)
-- Class C notes confirmed at A (high) (sf)
-- Class D notes confirmed at BBB (high) (sf)

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

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses, as of the September 2019 payment date.
-- Portfolio default rate (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.

TABS 1 and TABS 2018-1 are securitisations 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, Together Personal Finance Limited and Together Commercial Finance Limited, which are subsidiaries of the Together Group. Link Mortgage Services Limited (formerly Capita Mortgage Services Limited) acts as the standby servicer.

PORTFOLIO PERFORMANCE
-- For TABS 1, 60-90 day arrears represented 0.9% of the outstanding portfolio balance as of the September 2019 payment date, down from 1.0% in September 2018. The 90+ delinquency ratio was 2.4%, up from 1.1% in September 2018. Cumulative defaults were 1.4% and cumulative losses were 0.0%.
-- For TABS 2018-1, 60-90 day arrears represented 1.0% of the outstanding portfolio balance as of the September 2019 payment date, up from 0.3% in November 2018. The 90+ delinquency ratio was 1.1%, up from 0.2% in November 2018. Cumulative defaults were 0.1% and cumulative losses were 0.0%.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables for each transaction and has updated its base case PD and LGD assumptions as follows:
-- For TABS 1, DBRS Morningstar assumed a base case PD and LGD of 14.9% and 19.8%, respectively, for the remaining pool of receivables.
-- For TABS 2018-1, DBRS Morningstar assumed a base case PD and LGD of 12.6% and 19.0%, respectively, for the remaining pool of receivables.

CREDIT ENHANCEMENT AND RESERVES
-- For TABS 1, Class A credit enhancement was 32.8%, Class B credit enhancement was 25.9%, Class C credit enhancement was 19.0%, Class D credit enhancement was 12.1% and Class E credit enhancement was 8.6%, as of the September 2019 payment date. TABS 1 benefits from a General Reserve funded to GBP 3.0 million (2.0% of the Class A to E notes) which covers interest shortfall on the notes. A non-amortising Additional Reserve Fund is also funded to GBP 1.2 million which covers principal losses on the Class A to E Notes.
-- For TABS 2018-1, Class A credit enhancement was 28.6%, Class B credit enhancement was 23.3%, Class C credit enhancement was 18.0% and Class D credit enhancement was 8.0%, as of the September 2019 payment date. TABS 2018-1 benefits from a Reserve Fund split into a Liquidity Reserve component and General Reserve Component. The Liquidity Reserve is funded to GBP 2.5 million (1.5% of the Class A notes) and covers senior fees and interest shortfall on the Class A notes. As the Liquidity Reserve amortises, the excess becomes part of the General Reserve. The General Reserve is currently funded to GBP 4.3 million and covers senior fees, interest shortfall and principal losses via the principal deficiency ledgers on the Class A to D notes.

Elavon Financial Services DAC, U.K. Branch (Elavon UK) acts as the account bank for the transactions. Based on the DBRS Morningstar private rating of Elavon UK, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Natixis S.A., London branch (Natixis) acts as the Interest Rate Cap Provider for the TABS 2018-1 transaction. DBRS Morningstar's private rating of Natixis is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in British pound sterling 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 transaction 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 “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 reports provided by Together and loan-level data provided by US Bank Trustees Limited.

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 TABS 1 took place on 19 October 2018, when DBRS Morningstar confirmed its ratings of the Class A, Class B, Class C, Class D notes at AAA (sf), AA (sf), A (high) (sf) and BBB (sf), respectively, and upgraded its rating of the Class E notes to BBB (low) (sf) from BB (high) (sf).

The last rating action on TABS 2018-1 took place on 8 November 2018, when DBRS Morningstar finalised its provisional ratings of the Class A, Class B, Class C and Class D notes at AAA (sf), AA (high) (sf), A (high) (sf) and BBB (high) (sf), respectively.

The lead analyst responsibilities for these transactions have been transferred to Clare Wootton.

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 rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):
-- DBRS Morningstar 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.

-- For TABS 1, the base case PD and LGD assumptions are 14.9% and 19.8%, respectively.
-- For TABS 2018-1, the base case PD and LGD assumptions are 12.6% and 19.0%, 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 TABS 1 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 TABS 1 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 TABS 1 Class A notes would be expected to fall to BBB (high) (sf).

TABS 1:
Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (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 notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (high) (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 (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

Class C notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BB (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 BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

Class D notes 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 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)

Class E notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD, expected rating of BB (sf)
-- 50% increase in PD, expected rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)

TABS 2018-1:
Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (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 notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (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 (sf)

Class C notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (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 (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 notes 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 (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 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 Limited are subject to EU and US regulations only.

Lead Analyst: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
TABS 1: 11 September 2017
TABS 2018-1: 23 October 2018

DBRS Ratings Limited
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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.

-- 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
-- Derivative Criteria 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 this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

This web page was modified on 30 March 2020 to link the "Interest Rate Stresses for European Structured Finance Transactions" methodology as related research.