DBRS Morningstar Confirms Rating on Ineos Finance (Ireland) Limited

DBRS Ratings Limited (DBRS Morningstar) confirmed its AA (sf) rating on the Trade Receivables Loan Facility (the Facility) granted to Ineos Finance (Ireland) Limited (the Issuer).

The rating on the Facility addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date of 31 December 2022.

The transaction is a securitisation of trade receivables in the chemical industry granted by subsidiaries of INEOS Holdings Limited (INEOS), located in Belgium, France, Germany, UK, and the US. The trade receivables are purchased by drawings on multicurrency loans (in British pound sterling, euros, and US dollars) financed by four major UK banks with a total commitment of EUR 800 million (either as direct Lenders or Conduit Lenders via the issuance of commercial papers). Subordinated loans provided by INEOS also finance a portion of the portfolio up to EUR 2 billion.

The transaction originally closed in July 2006 and has been in its revolving period since this date.

PORTFOLIO PERFORMANCE
As of 12 January 2021, the gross receivables balance was equivalent to EUR 776 million and the three-month average delinquency ratio, the three-month average loss ratio, the three-month average dilution ratio, the dynamic loss and dynamic dilution reserve percentage, and the weighted-average days sales outstanding over three months were at 0.4%, 0.3%, 1.7%, 12.9%, and 30, respectively, below their respective trigger levels of 2.5%, 1.0%, 5.5%, 23.0%, and 60, respectively. Compared with a year ago, the 90+ delinquency bucket increased to 0.9% of the gross receivables balance from 0.3%, and defaulted receivables represented 0.4% of the aggregate amount of sales over the last six months, up from 0.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar evaluates the adequacy of available credit enhancement through the compliance with transaction definitions of the loss reserve, the dilution reserve, and the carrying cost reserve and level of factors incorporated in these definitions. The loss and dilution stress factors are both 2.5 allowing for a AA (sf) rating.

CREDIT ENHANCEMENT
Credit enhancement is provided by the subordination of the subordinated loan, and overcollateralization of the portfolio. As of 12 January 2020, the credit enhancement on the Facility is 85.3% and the dynamic loss reserve and the dilution reserve stand at 3.7% and 9.2% of the net receivables balance, respectively, while the interest and fee reserve is sized at 0.2% of the net receivables balance.

Citibank, N.A., London Branch acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of Citibank, N.A., London Branch, 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 Facility, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

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 last updated on 2 December 2020. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/370672/global-macroeconomic-scenarios-december-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar considers that no additional coronavirus-related adjustments for trade receivable securitisations is necessary in the moderate scenario outlined in the aforementioned macroeconomic commentaries.

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 the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

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 rating is “Master European Structured Finance Surveillance Methodology” (22 April 2020).

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the eligibility criteria and maximum potential borrowing set forth in the transaction legal documents.

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 at: http://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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for this rating include monthly reports, settlement reports, and summary reports provided by Citibank, N.A., London Branch.

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

At the time of the initial rating DBRS Morningstar was not 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 this rating 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 this transaction took place on 24 January 2020, when DBRS Morningstar confirmed the rating on the Facility at AA (sf).

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

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
--DBRS Morningstar expected a loss stress factor and a dilution stress factor commensurate with the rating level as per the standards described in its “Rating European Trade Receivables Securitisation Transactions” methodology. Changes in the transaction documents with respect to these stress factors can have a direct impact on the rating of the Facility.
--The loss stress factor and dilution stress factor expected at AA (sf) rating level are both 2.25. The current loss stress factor and dilution stress factor are both 2.5.

Facility Risk Sensitivity:
--A decrease of the loss stress factor and the dilution stress factor to 2.25 from 2.5, expected rating of AA (sf)
--A decrease of the loss stress factor and the dilution stress factor to 2 from 2.5, expected rating of A (sf)
--A decrease of the loss stress factor and the dilution stress factor to 1.75 from 2.5, expected rating of BBB (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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.
This rating is endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Natalia Coman, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 3 November 2010

DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies

--Master European Structured Finance Surveillance Methodology (22 April 2020)
https://www.dbrsmorningstar.com/research/359884/master-european-structured-finance-surveillance-methodology
--Rating European Trade Receivables Securitisation Transactions (9 November 2020) https://www.dbrsmorningstar.com/research/369804/rating-european-trade-receivables-securitisation-transactions
--Interest Rate Stresses for European Structured Finance Transactions (28 September 2020)
https://www.dbrsmorningstar.com/research/367292/interest-rate-stresses-for-european-structured-finance-transactions
--Legal Criteria for European Structured Finance Transactions (17 September 2019)
https://www.dbrsmorningstar.com/research/366797/legal-criteria-for-european-structured-finance-transactions-request-for-comment
--Operational Risk Assessment for European Structured Finance Servicers (19 November 2020)
https://www.dbrsmorningstar.com/research/370270/operational-risk-assessment-for-european-structured-finance-servicers
--Operational Risk Assessment for European Structured Finance Originators (30 September 2020)
https://www.dbrsmorningstar.com/research/367603/operational-risk-assessment-for-european-structured-finance-originators

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375

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