DBRS Morningstar Upgrades and Confirms Ratings on Dublin Bay Securities 2018-MA1 DAC

DBRS Ratings GmbH (DBRS Morningstar) upgraded and confirmed its ratings on the bonds issued by Dublin Bay Securities 2018-MA1 DAC (the Issuer) as follows:

-- Class A1 confirmed at AAA (sf)
-- Class A2A confirmed at AAA (sf)
-- Class A2B confirmed at AAA (sf)
-- Class S confirmed at AAA (sf)
-- Class B confirmed at AA (sf)
-- Class C confirmed at A (high) (sf)
-- Class D confirmed at A (sf)
-- Class E upgraded to BBB (high) (sf) from BBB (sf)
-- Class F upgraded to BB (high) (sf) from B (high) (sf)
-- Class Z1 upgraded to BB (low) (sf) from B (low) (sf)

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the September 2021 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; and
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The Issuer is a bankruptcy-remote special-purpose vehicle (SPV) incorporated in the Republic of Ireland (Ireland). The Issuer used the proceeds of the notes to fund the purchase of Irish residential mortgage loans originated by Bank of Scotland plc (Bank of Scotland) and secured over properties located in Ireland. In September 2018, the Bank of Scotland sold the portfolio mortgages to Erimon Home Loans Ireland Limited, a bankruptcy-remote SPV wholly owned by Barclays Bank plc. Pepper Finance Corporation acts as servicer of the mortgage portfolio during the life of the transaction while CSC Capital Markets (Ireland) Limited acts as the replacement servicer facilitator.

PORTFOLIO PERFORMANCE
As of September 2021, loans two to three months in arrears represented 0.3% of the outstanding portfolio balance, down from 0.9% in September 2020. The 90+-day delinquency ratio was 3.0%, up from 2.0% in the same period, and the cumulative default and loss ratios remained at 0.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 3.2% and 13.5%, respectively.

CREDIT ENHANCEMENT
As of September 2021, credit enhancement for the Class A1, Class A2A, and Class A2B notes was 20.5%, up from 20.2% in September 2020. In the same period, the credit enhancements for the Class B, Class C, Class D, Class E, Class F, and Class Z1 notes were 16.3%, 13.6%, 10.4%, 8.1%, 5.9%, and 4.5%, respectively, up from 16.0%, 13.2% 10.0%, 7.7%, 5.5%, and 3.6%, respectively. The Class S notes are excess spread notes (i.e., they are not collateralised and do not have any credit enhancement). The Class S notes are redeemed under the pre-enforcement revenue priority of payments, but principal receipts can be used to cure shortfalls in the required payments for the Class S notes.

The transaction benefits from the Protected Amortisation Reserve Fund of EUR 8.0 million, which provides credit and liquidity support to the Class A2A and Class A2B notes to ensure that the scheduled payments are met. The reserve fund was unfunded at transaction closing. It reached its target level of 2% of the original balance of the collateralised notes according to the September 2019 interest payment date.

The transaction also benefits from a liquidity reserve fund of EUR 3.2 million, which is available to provide liquidity support to the senior fee and interest payments on the Class A and Class S notes.

The Issuer Account Bank, Paying Agent, and Cash Manager is Citibank, N.A., London Branch (Citibank). Based on DBRS Morningstar’s private rating on Citibank, 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 Citibank to be consistent with the rating assigned to the notes, as described in DBRS Morningstar 's "Legal Criteria for European Structured Finance Transactions" methodology.

The ratings on the Class F and Z1 notes materially deviate from the higher ratings implied by the quantitative model. DBRS Morningstar considers a material deviation to be a rating difference of three or more notches between the assigned rating and the rating implied by a quantitative model that is a substantial component of a rating methodology; in this case, the ratings also reflect qualitative factors that are not precisely captured in the quantitative model. The Class F and Z1 notes are the most junior tranches in the transaction and, as a result, will be more exposed to any potential performance deterioration. The current performance trend observed since closing might not be sustainable amid the potential additional stresses that have arisen during the current Coronavirus Disease (COVID-19) pandemic.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an immediate 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 RMBS 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 this transaction, DBRS Morningstar increased the expected default rate for self-employed borrowers and conducted an additional sensitivity analysis to determine that the transaction benefits 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 9 December 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/389454/baseline-macroeconomic-scenarios-for-rated-sovereigns-december-2021-update 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.

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 this transaction 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 transaction 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.

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 DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include investor reports provided by Citibank 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 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 this transaction took place on 18 December 2020, when DBRS Morningstar confirmed its ratings on the Class A1, Class A2A, Class A2B, Class S, Class B, Class C, Class D, Class E, Class F, and Class Z1 notes at AAA (sf), AAA (sf), AAA (sf), AAA (sf), AA (sf), A (high) (sf), A (sf), BBB (sf), B (high) (sf), and B (low) (sf), respectively. DBRS Morningstar also removed the ratings on the Class C, Class D, Class E, Class F, and Class Z1 notes from Under Review with Negative Implications.

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 rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (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.
-- The base case PD and LGD of the current pool of loans for the Issuer are 3.2% and 13.5%, respectively.
-- The risk sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A1 notes would be expected to remain at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A1 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 A1 notes would be expected to fall to A (high) (sf).

Class A1 Risk Sensitivity:
-- 25% increase of the PD, expected rating of AA (high) (sf)
-- 50% increase of the PD, expected rating of AA (high) (sf)
-- 25% increase of the LGD, expected rating of AA (high) (sf)
-- 50% increase of the LGD, expected rating of AA (high) (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of AA (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of A (high) (sf)

Class A2 Risk Sensitivity:
-- 25% increase of the PD, expected rating of AAA (sf)
-- 50% increase of the PD, expected rating of AA (high) (sf)
-- 25% increase of the LGD, expected rating of AA (high) (sf)
-- 50% increase of the LGD, expected rating of AA (high) (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of AA (high) (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of AA (high) (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of AA (sf)

Class S Risk Sensitivity:
-- 25% increase of the PD, expected rating of AA (high) (sf)
-- 50% increase of the PD, expected rating of AA (high) (sf)
-- 25% increase of the LGD, expected rating of AA (high) (sf)
-- 50% increase of the LGD, expected rating of AA (high) (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of AA (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of A (high) (sf)

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

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

Class D Risk Sensitivity:
-- 25% increase of the PD, expected rating of A (sf)
-- 50% increase of the PD, expected rating of A (low) (sf)
-- 25% increase of the LGD, expected rating of A (sf)
-- 50% increase of the LGD, expected rating of A (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of A (low) (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of BBB (high) (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of BBB (high) (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of BBB (sf)

Class E Risk Sensitivity:
-- 25% increase of the PD, expected rating of BBB (high) (sf)
-- 50% increase of the PD, expected rating of BBB (high) (sf)
-- 25% increase of the LGD, expected rating of BBB (high) (sf)
-- 50% increase of the LGD, expected rating of BBB (high) (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of BBB (high) (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of BBB (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of BBB (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of BBB (low) (sf)

Class F Risk Sensitivity:
-- 25% increase of the PD, expected rating of BB (high) (sf)
-- 50% increase of the PD, expected rating of BB (high) (sf)
-- 25% increase of the LGD, expected rating of BB (high) (sf)
-- 50% increase of the LGD, expected rating of BB (high) (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of BB (high) (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of BB (high) (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of BB (high) (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of BB (high) (sf)

Class Z1 Risk Sensitivity:
-- 25% increase of the PD, expected rating of BB (low) (sf)
-- 50% increase of the PD, expected rating of BB (low) (sf)
-- 25% increase of the LGD, expected rating of BB (low) (sf)
-- 50% increase of the LGD, expected rating of BB (low) (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of BB (low) (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of BB (low) (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of BB (low) (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of BB (low) (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.

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

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 22 October 2018

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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 (8 February 2021),
https://www.dbrsmorningstar.com/research/373435/master-european-structured-finance-surveillance-methodology.
-- Legal Criteria for European Structured Finance Transactions (29 July 2021), https://www.dbrsmorningstar.com/research/382171/legal-criteria-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.
-- 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.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021), https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions.
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (29 November 2021) and European RMBS Credit Model v 1.0.0.0, https://www.dbrsmorningstar.com/research/388848/master-european-residential-mortgage-backed-securities-rating-methodology-and-jurisdictional-addenda

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].