DBRS Morningstar Takes Rating Actions on Two Fastnet Securities Transactions

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

Fastnet 6:
-- Class A3 confirmed at AAA (sf)

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

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal
final maturity date in December 2050 for Fastnet 6 and 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 as of the December 2019 payment date;
-- 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 6 and Fastnet 11 are securitisations of Irish first-lien residential mortgages originated and serviced by permanent tsb p.l.c. (PTSB). Fastnet 6 closed in November 2008 with an initial portfolio balance of EUR 2.40 billion. Fastnet 11 closed in March 2016 with an initial portfolio balance of EUR 2.02 billion, and additional assets in the amount of EUR 0.89 billion purchased on the first payment date in April 2016.

PORTFOLIO PERFORMANCE
-- Fastnet 6: as of the December 2019 payment date, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.3% and 0.3% of the outstanding portfolio balance, respectively, while loans more than 90 days delinquent represented 0.9%. Loans currently in repossession totalled 1.8% of the outstanding portfolio balance. The cumulative realised losses have increased to 0.19% of the initial portfolio balance from 0.01% one year ago.

-- Fastnet 11: as of the December 2019 payment date, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.4% and 0.2% of the outstanding portfolio balance, respectively, while loans more than 90 days delinquent represented 0.3%. The cumulative realised losses have increased to 0.02% of the aggregate initial portfolio balance from zero one year ago.

PORTFOLIO ASSUMPTIONS
For Fastnet 6, DBRS Morningstar updated its base case PD and LGD assumptions on the remaining receivables to 11.3% and 30.7%, respectively. For Fastnet 11, the base case PD and LGD assumptions were updated to 6.9% and 34.0%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations and the general reserve funds provide credit enhancement to the rated notes in the transactions. Both transactions continue to deleverage steadily, resulting in increased credit enhancement available to the rated notes.

As of the December 2019 payment date, credit enhancement to the Class A3 notes in Fastnet 6 has increased to 74.9% from 65.7% one year ago. When considering the sequential principal repayment, credit enhancement to the Class A1, Class A2, and Class A3 notes in Fastnet 11 has increased to 89.2%, 55.7%, and 30.5% from 75.1%, 46.8%, and 25.5% one year ago, respectively.

Both transactions benefit from a nonamortising general reserve fund, providing credit support to the rated notes. In Fastnet 6, the reserve is equal to its target level of EUR 26.4 million, while in Fastnet 11 the reserve is equal to its target level of EUR 58.2 million. Fastnet 11 additionally benefits from an amortising liquidity reserve fund with a target balance equal to 2.5% of the outstanding rated notes balance, currently at its target of EUR 32.2 million.

BNP Paribas Securities Services, London Branch (BNPSS) acts as the account bank for Fastnet 6, while the Bank of New York Mellon, London Branch (BNYM) acts as the account bank for Fastnet 11. Based on the DBRS Morningstar private rating of BNPSS and public rating of BNYM at AA (high), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, DBRS Morningstar considers the risk 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.

DBRS Morningstar analysed the transaction structures 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 transaction 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 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 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 actions on these transactions took place on 11 January 2019, when DBRS Morningstar confirmed the rating on the Class A3 notes of Fastnet 6 at AAA (sf), confirmed the ratings on the Class A1 and Class A2 notes of Fastnet 11 at AAA (sf), and upgraded the rating on the Class A3 notes in Fastnet 11 to AA (high) (sf) from 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 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 Fastnet 6, the base case PD and LGD assumptions for the remaining collateral pool are 11.3% and 30.7%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 35.2% and 66.0%, respectively.

-- For Fastnet 11, the base case PD and LGD assumptions for the remaining collateral pool are 6.9% and 34.0%, respectively. At the AAA (sf) rating level, the corresponding PD and LGD are 29.2% and 64.7%, 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 Fastnet 11 Class A3 notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Fastnet 11 Class A3 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 Fastnet 11 Class A3 notes would be expected to decrease to AA (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 AAA (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 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 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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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 6 Initial Rating Date: 21 January 2015
Fastnet 11 Initial Rating Date: 24 March 2016

DBRS Ratings GmbH
Neue Mainzer Straße 75
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].