DBRS Morningstar Confirms Ratings on Fastnet 14 and Fastnet 15

DBRS Ratings GmbH (DBRS Morningstar) 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).

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 as of the June 2020 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;
-- Current economic environment and sustainable performance assessment, as a result of the Coronavirus Disease (COVID-19) outbreak.

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 2020 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 0.3%. To date, there have only been two repossessed loans.

-- Fastnet 15: as of the June 2020 payment date, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.2% and 0.2% of the outstanding principal balance, respectively, while loans more than 90 days delinquent amounted to 0.5%. To date, there have been no repossessions or realised losses on the mortgage loans.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
For Fastnet 14, DBRS Morningstar updated its base case PD and LGD assumptions on the remaining receivables to 10.2% and 29.2%, respectively, from 9.1% and 28.7%, respectively. For Fastnet 15, the base case PD and LGD assumptions were updated to 10.3% and 29.3%, respectively, from 9.3% and 28.8%, respectively. The higher loss numbers reflect the increased economic uncertainty in the short- and medium-term as a result of the coronavirus pandemic.

CREDIT ENHANCEMENT
The subordination of the Class Z Notes and the general reserve fund provide credit enhancement to the respective Class A Notes in the transactions. As of the June 2020 payment date, credit enhancement to the Class A Notes in Fastnet 14 increased to 31.3% from 27.5% at the time of the previous annual review; credit enhancement to the Class A Notes in Fastnet 15 increased to 30.9% from 27.0% in that timeframe.

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 respective initial notes balance. As of the June 2020 payment date:

-- Fastnet 14: general reserve fund at EUR 12.3 million and liquidity reserve fund at EUR 16.5 million.
-- Fastnet 15: general reserve fund at EUR 12.4 million and liquidity reserve fund at EUR 16.1 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 Morningstar private rating of BNYM-Dublin, 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 bank to be consistent with the ratings assigned to the respective Class A Notes in the transactions, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structures in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may arise in the coming months for many RMBS transactions, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were updated on 1 June 2020. For details see the following commentaries: https://www.dbrsmorningstar.com/research/361868/dbrs-morningstar-global-macroeconomic-scenarios-june-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information on DBRS Morningstar considerations for European RMBS transactions and Coronavirus Disease (COVID-19), please see the following commentary: https://www.dbrsmorningstar.com/research/360599.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (22 April 2020). 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 action.

Other methodologies referenced in these transactions are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.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.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor 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 purpose 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 24 June 2019, when DBRS Morningstar confirmed the rating of the Class A Notes at AAA (sf) issued by Fastnet Securities 14 DAC and confirmed the rating of the Class A Notes at AAA (sf) issued by Fastnet Securities 15 DAC

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies is available at www.dbrsmorningstar.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 14, the base case PD and LGD assumptions for the remaining collateral pool are 10.2% and 29.2%, respectively.
-- For Fastnet 15, the base case PD and LGD assumptions for the remaining collateral pool are 10.3% and 29.3%, 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 Class A Notes in Fastnet 14 would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A Notes in Fastnet 14 would be expected to decrease to AA (high) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes in Fastnet 14 would be expected to decrease to AA (low) (sf).

Fastnet 14 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 AA (high) (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 (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 (low) (sf)

Fastnet 15 Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (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 (high) (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 AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and U.S. regulations only.

Lead Analyst: Daniel Rakhamimov, Senior 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

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of these Transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (22 April 2020),
https://www.dbrsmorningstar.com/research/359884/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020), https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers.
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (10 December 2019) and European RMBS Credit Model v 1.0.0.0,
https://www.dbrsmorningstar.com/research/354403/master-european-residential-mortgage-backed-securities-rating-methodology-and-jurisdictional-addenda.
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019), https://www.dbrsmorningstar.com/research/351557/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 https://www.dbrsmorningstar.com/research/278375.

For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

On 2 July 2020, this press release was amended to include information relating to the previous rating action.