DBRS Morningstar Takes Rating Actions on Two Together Asset Backed Securitisation Transactions

DBRS Ratings Limited (DBRS Morningstar) took the following rating actions on the notes issued by Together Asset Backed Securitisation 2018-1 Plc (TABS 2018-1) and Together Asset Backed Securitisation 2019-1 Plc (TABS 2019-1):

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

TABS 2019-1
-- 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)
-- Class E notes confirmed at BBB (low) (sf)

For both transactions, the rating of the Class A notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date. The ratings of the Class B, Class C, and Class D notes for both transactions, and the Class E notes for TABS 2019-1, address the ultimate payment of interest and principal on or before the legal final maturity date while junior, and timely payment of interest while the senior-most class outstanding.

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 August 2021 and September 2021 payment dates for TABS 2018-1 and TABS 2019-1, respectively.
-- 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.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

TABS 2018-1 and TABS 2019-1 are securitisations of first- and second-lien residential mortgages, both owner-occupied and buy-to-let, by Together Financial Services Limited. The loans are originated and serviced by Belamin Finance Limited, Together Personal Finance Limited, and Together Commercial Finance Limited, all of which belong to the Together Group of companies. BCM Global Mortgage Services Limited (formerly Link Mortgage Services Limited) acts as the standby servicer for both transactions.

There have been recent amendments to the TABS 2018-1 transaction, which will come into effect in October 2021. The amendments include (i) a change of the reference rate of the notes from three-month GBP LIBOR to compounded daily Sterling Overnight Index Average (SONIA); (ii) adjustments to the margins applicable to the notes; (iii) a reduction in the interest rate cap strike rate to 2.3807% from 2.5% and a change of the reference rate of the interest rate cap from three-month GBP LIBOR to compounded daily SONIA; (iv) an adjustment to the minimum weighted-average interest rate condition applicable to the loans from three-month GBP LIBOR + 3.5% to compounded daily SONIA + 3.6193%.

PORTFOLIO PERFORMANCE
In relation to TABS 2018-1, as of the August 2021 payment date, the two- to three-month arrears represented 0.8% of the outstanding portfolio balance and loans at least three months in arrears represented 6.4%. The cumulative loss ratio was 0.0%.

In relation to TABS 2019-1, as of the September 2021 payment date, the two- to three-month arrears represented 0.8% of the outstanding portfolio balance and loans at least three months in arrears represented 2.3%. The cumulative loss ratio was 0.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables for each transaction and updated its base case PD and LGD assumptions as follows:
-- For TABS 2018-1, DBRS Morningstar assumed a base case PD and LGD of 16.7% and 18.7% (including coronavirus-related adjustments), respectively, for the remaining pool of receivables.
-- For TABS 2019-1, DBRS Morningstar assumed a base case PD and LGD of 13.7% and 20.5%, (including coronavirus-related adjustments), respectively, for the remaining pool of receivables.

CREDIT ENHANCEMENT AND RESERVES
-- In relation to TABS 2018-1, Class A credit enhancement was 43.9%, Class B credit enhancement was 35.8%, Class C credit enhancement was 27.7%, and Class D credit enhancement was 12.5%, as of the August 2021 payment date.
-- In relation to TABS 2019-1, Class A credit enhancement was 33.5%, Class B credit enhancement was 26.8%, Class C credit enhancement was 20.9%, Class D credit enhancement was 12.0%, and Class E credit enhancement was 9.8%, as of the September 2021 payment date.

Each transaction benefits from a reserve fund split into a liquidity reserve component and a general reserve component. The liquidity reserves for TABS 2018-1 and TABS 2019-1 are funded to their floors of GBP 2.3 million and GBP 2.6 million, respectively. The liquidity reserve 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 reserves for TABS 2018-1 and TABS 2019-1 are currently funded to GBP 4.6 million and GBP 5.3 million, respectively. The general reserve covers senior fees, interest shortfall, and principal losses via the principal deficiency ledgers on all the rated notes.

Elavon Financial Services DAC, U.K. Branch acts as the account bank for both transactions. Based on the DBRS Morningstar private rating of Elavon Financial Services DAC, U.K. Branch, the downgrade provisions outlined in the transactions documents, and other mitigating factors inherent in the transactions’ structures, 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) and HSBC Bank plc (HSBC) act as the Interest Rate Cap Providers for TABS 2018-1 and TABS 2019-1, respectively. DBRS Morningstar's private ratings of Natixis and HSBC are consistent with the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading in some cases to 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 structured finance transactions. The ratings are based on additional analysis 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 self-employed borrowers, assessed a potential reduction in portfolio prepayment rates, 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. The DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced reports. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/384150/baseline-macroeconomic-scenarios-for-rated-sovereigns and https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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 British pound sterling 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 TABS 2018-1 transaction legal documents was conducted in the context of an amendment to the transaction, which will come into effect in October 2021. A review of the TABS 2019-1 transaction 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/381451/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by Together Financial Services Limited 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 these transactions took place on 24 September 2020, when DBRS Morningstar confirmed its ratings of the TABS 2018-1 Class A, Class B, Class C, and Class D notes at AAA (sf), AA (high) (sf), A (high) (sf), and BBB (high) (sf), respectively, and confirmed its ratings of the TABS 2019-1 Class A, Class B, Class C, Class D, and Class E notes at AAA (sf), AA (high) (sf), A (high) (sf), BBB (high) (sf), and BBB (low) (sf), respectively.

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 TABS 2018-1, the base case PD and LGD of the current pool of loans for the Issuer are 16.7% and 18.7%, respectively.
-- For TABS 2019-1, the base case PD and LGD of the current pool of loans for the Issuer are 13.7% and 20.5%, respectively.

-- The risk sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumptions. For example, for TABS 2018-1, if the LGD increases by 50%, the rating of the Class A notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to fall to A (high) (sf).

TABS 2018-1:

Class A Notes 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 (low) (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)

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

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

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

TABS 2019-1:

Class A Notes 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 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 (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

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

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 (high) (sf)
-- 50% increase in PD, expected rating of BB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (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)

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 GmbH for use in the European Union.

Lead Analyst: Clare Wootton, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
--TABS 2018-1: 23 October 2018
--TABS 2019-1: 23 September 2019

DBRS Ratings Limited
20 Fenchurch Street
31st Floor
London
EC3M 3BY
United Kingdom
Tel. +44 (0) 20 7855 6600

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: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (29 July 2021), https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (8 February 2021), https://www.dbrsmorningstar.com/research/373435/master-european-structured-finance-surveillance-methodology.
-- 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.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021), https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers.
-- European RMBS Insight Methodology (3 June 2021) and European Asset RMBS Insight Model v 5.2.0.0, https://www.dbrsmorningstar.com/research/379557/european-rmbs-insight-methodology.
-- European RMBS Insight: UK Addendum (9 October 2020), https://www.dbrsmorningstar.com/research/368132/european-rmbs-insight-uk-addendum.
-- 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.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021)
https://www.dbrsmorningstar.com/research/384624/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 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].