DBRS Morningstar Confirms Ratings on Fastnet Securities 14 DAC and Fastnet Securities 15 DAC

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 ratings address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in August 2055.

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 May 2021 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 the AAA (sf) rating level; and
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

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.

PORTFOLIO PERFORMANCE
-- Fastnet 14: As of the May 2021 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 0.7%. To date, there have been six repossessed properties, representing 0.08% of the initial portfolio balance, with cumulative recoveries of 87.6%.

-- Fastnet 15: As of the May 2021 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 0.9%. To date, there have only been two repossessed properties, with no recoveries or losses realised to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
For Fastnet 14, DBRS Morningstar updated its base case PD and LGD assumptions on the remaining receivables to 5.5% and 17.4%, respectively, from 10.2% and 29.2%, respectively. For Fastnet 15, DBRS Morningstar updated its base case PD and LGD assumptions to 5.8% and 17.8%, respectively, from 10.3% and 29.3%, respectively. The lower loss numbers reflect the reduced risk profile of the collateral pools, with a significant decrease in the share of interest-only and buy-to-let loans compared with 12 months ago, as well as rising housing prices in Ireland.

CREDIT ENHANCEMENT
The subordination of the respective Class Z notes and the general reserve funds provide credit enhancement to the respective Class A notes in each transaction. As of the May 2021 payment date, credit enhancement to the Class A notes in Fastnet 14 increased to 41.6% from 31.3% at the time of the previous annual review while credit enhancement to the Class A notes in Fastnet 15 increased to 42.0% from 30.9% in that time frame.

Each transaction benefits from a general reserve fund and a liquidity reserve fund, providing credit support and liquidity support, respectively, funded at closing through a subordinated loan. Together, the general reserve and liquidity reserve funds equal 2.0% of the initial notes balance in each transaction. As of the May 2021 payment date:

-- Fastnet 14: general reserve fund at EUR 18.0 million and liquidity reserve fund at EUR 10.9 million.
-- Fastnet 15: general reserve fund at EUR 17.9 million and liquidity reserve fund at EUR 10.6 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 on 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 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 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 continue to increase 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. For these transactions, DBRS Morningstar incorporated an increase in probability of default for certain borrower characteristics and conducted additional sensitivity analysis to determine that the transactions benefit from sufficient liquidity support to withstand potential high levels of payment holidays in the portfolio. As of 30 April 2021, loans benefitting from payment holidays represented 0.8% and 0.9% in the Fastnet 14 and Fastnet 15 portfolios, respectively.

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 18 June 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/380281/global-macroeconomic-scenarios-june-2021-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.

On 14 June 2021, DBRS Morningstar updated its 5 May 2020 commentary outlining the impact of the coronavirus crisis on performance of DBRS Morningstar-rated RMBS transactions in Europe one year on. For more details, please see: https://www.dbrsmorningstar.com/research/380094/the-impact-of-covid-19-on-european-mortgage-performance-one-year-on and https://www.dbrsmorningstar.com/research/360599/european-rmbs-transactions-risk-exposure-to-coronavirus-covid-19-effect.

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 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.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (8 February 2021).

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.

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 action.

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 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 ratings action on these transactions took place on 23 June 2020, when DBRS Morningstar confirmed the AAA (sf) rating on the Class A notes issued by Fastnet 14 and the AAA (sf) rating on the Class A notes issued by Fastnet 15.

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 5.5% and 17.4%, respectively.
-- For Fastnet 15, the base case PD and LGD assumptions for the remaining collateral pool are 5.8% and 17.8%, 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 remain at AAA (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 remain at AAA (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 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 15 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)

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. 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.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Fastnet 14 Initial Rating Date: 22 June 2018
Fastnet 15 Initial Rating Date: 28 June 2018

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

-- Master European Structured Finance Surveillance Methodology (8 February 2021), https://www.dbrsmorningstar.com/research/373435/master-european-structured-finance-surveillance-methodology.
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (14 January 2021) and European RMBS Credit Model v 1.0.0.0, https://www.dbrsmorningstar.com/research/372339/master-european-residential-mortgage-backed-securities-rating-methodology-and-jurisdictional-addenda.
-- Legal Criteria for European Structured Finance Transactions (6 April 2021), https://www.dbrsmorningstar.com/research/376314/legal-criteria-for-european-structured-finance-transactions.
-- 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.
-- 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.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021), https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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