Press Release

DBRS Morningstar Confirms Ratings on Three Together Asset Backed Securitisation CRE Transactions

RMBS

March 15, 2023

DBRS Ratings Limited (DBRS Morningstar) confirmed its ratings on the notes issued by Together Asset Backed Securitisation 2021-CRE1 Plc (TABS 2021-CRE1), Together Asset Backed Securitisation 2021-CRE2 Plc (TABS 2021-CRE2), and Together Asset Backed Securitisation 2022-CRE1 Plc (TABS 2022-CRE1) as follows:

TABS 2021-CRE1:
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (high) (sf)
-- Class E Notes at BB (low) (sf)

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The ratings on the Class B, Class C, Class D, and Class E notes address the timely payment of interest while the senior-most class outstanding and the ultimate payment of interest and principal on or before the legal final maturity date.

TABS 2021-CRE2:
-- Class A Loan Note at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at B (sf)

The rating on the Class A Loan Note addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date. The ratings on the Class B, Class C, Class D, and Class E notes address the timely payment of interest while the senior-most class outstanding and the ultimate repayment of principal on or before the legal final maturity date.

TABS 2022-CRE1:
-- Loan Note at AA (sf)
-- Class B at A (sf)
-- Class C at BBB (sf)
-- Class D at BB (sf)

The rating on the Loan Note addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date. The ratings on the Class B, Class C, and Class D notes address the timely payment of interest while the senior-most class outstanding and the ultimate repayment of principal on or before the legal final maturity date.

The confirmations on all transactions are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the latest payment date (February 2023 for TABS 2021-CRE1 and TABS 2021-CRE2, and January 2023 for TABS 2022-CRE1);
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

The transactions are securitisations of first- and second-lien mortgage loans, both owner-occupied and non-owner-occupied, backed by commercial, mixed-use, and residential properties located in the United Kingdom. The mortgages are originated and serviced by Together Commercial Finance Limited (TCFL). In TABS 2022-CRE1, the mortgages are also originated and serviced by Harpmanor Limited (Harpmanor), which is part of the Together Group. DBRS Morningstar considered Harpmanor’s underwriting and servicing practices to be in line with TCFL’s, allowing a comparison with TABS 2021-CRE1 and TABS 2021-CRE2 and similar analysis for the transaction.

BCM Global Mortgage Services Limited (formerly Link Mortgages Services Limited) acts as the standby servicer for all transactions.

The loans in the portfolios are also subject to cross-default and cross-collateralisation, and include borrowers with prior county court judgments and a high concentration of self-employed borrowers.

The Class A Loan Note in TABS 2021-CRE2 and the Loan Note in TABS 2022-CRE1 are not listed and were instead purchased by the respective noteholders via a loan note agreement. Similar to the other classes of notes, the Class A Loan Noteholder/Loan Noteholder is entitled to receive payments of interest and principal in line with the priority of payments.

The first call dates are the February 2025, February 2026, and October 2026 payment dates for TABS 2021-CRE1, TABS 2021-CRE2, and TABS 2022-CRE1, respectively, and coincide with a step-up in the coupons. The legal final maturity dates are the January 2055, August 2052, and April 2054 payment dates, respectively.

PORTFOLIO PERFORMANCE
Delinquencies have been low in all transactions since closing, with worse performance for TABS 2021-CRE2 compared with the other two transactions.

For TABS 2021-CRE1, two- to three-month delinquencies and 90+-day delinquencies were 0.8% and 0.4% as of the latest payment date, respectively, up from 0.0% since the last annual review.

For TABS 2021-CRE2, two- to three-month delinquencies and 90+-day delinquencies were 0.0% and 1.1% as of the latest payment date, respectively, compared with 0.1% at the last annual review. DBRS Morningstar noted an increasing trend in the 90+-day delinquencies, but the delinquency levels remain low.

For TABS 2022-CRE1, two to three-month delinquencies and 90+-day delinquencies were 0.6% and 0.0% as of the latest payment date, respectively.

As of the latest payment date, there were no cumulative repossessions and cumulative principal losses were zero for all transactions.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables in all transactions.

For TABS 2021-CRE1, DBRS Morningstar updated its base case PD and LGD assumptions to 10.1% and 10.3%, respectively, from 11.2% and 9.1% at the last annual review, respectively.

For TABS 2021-CRE2, DBRS Morningstar updated its base case PD and LGD assumptions to 10.9% and 14.5%, respectively, from 10.2% and 12.6% at the last annual review, respectively.

For TABS 2022-CRE1, DBRS Morningstar updated its base case PD and LGD assumptions to 10.0% and 13.1%, respectively, from 11.2% and 9.1% at closing, respectively.

In all transactions, the increase in the LGD assumptions stems from conservative assumptions that DBRS Morningstar applied to the property valuations of the commercial real estate underlying the collateral, which DBRS Morningstar views as potentially subject to additional price volatility in the current economic environment. The decrease in the PD assumptions for TABS 2021-CRE1 and TABS 2022-CRE2 stems from lower loan-to-value ratios and increased seasonality, whereas the increasing trend in late arrears since the last annual review drives the increase in the PD assumption for TABS 2021-CRE2.

CREDIT ENHANCEMENT
As of the latest payment date, the credit enhancement (CE) evolved since the last rating action as follows:

TABS 2021-CRE1
-- CE to the Class A Notes increased to 28.9% from 24.1%
-- CE to the Class B Notes increased to 21.5% from 17.9%
-- CE to the Class C Notes increased to 15.8% from 13.0%
-- CE to the Class D Notes increased to 10.5% from 8.6%
-- CE to the Class E Notes increased to 5.6% from 4.5%

TABS 2021-CRE2
-- CE to the Class A Loan Notes increased to 28.3% from 22.6%
-- CE to the Class B Notes increased to 21.1% from 16.7%
-- CE to the Class C Notes increased to 15.4% from 12.2%
-- CE to the Class D Notes increased to 10.3% from 8.0%
-- CE to the Class E Notes increased to 5.5% from 4.2%

TABS 2021-CRE1
-- CE to the Loan Note increased to 15.0% from 13.5%
-- CE to the Class B increased to 10.0% from 9.0%
-- CE to the Class C increased to 6.1%, from 5.5%
-- CE to the Class D increased to 3.9% from 3.5%.

The CE to the notes consists of the subordination of the respective junior notes as well as the general reserve fund (GRF) for TABS 2021-CRE1 and TABS 2021-CRE2. The GRF for each is available to cover senior fees and interest on the Class A/Class A Loan Note to the Class E Notes and principal losses via the principal deficiency ledgers (PDLs) on the Class A/Class A Loan Note to Class Z notes. As of the February 2023 payment date, both GRFs were at their target level, equal to 2% of the portfolio outstanding balance at closing minus the liquidity reserve.

As of the latest payment date, all PDLs were clear in all transactions.

The Class A Notes/Class A Loan Note/Loan Note benefit from a dedicated liquidity reserve, which covers the payment of senior fees and interest shortfalls on this class of notes/loan note. The liquidity reserve is amortising with a target amount set at 1.5% of the Class A Notes/Class A Loan Note outstanding balance and floored at 1% of the Class A Notes/Class A Loan Note balance at closing in TABS 2021-CRE1 and TABS 2021-CRE2. The liquidity reserve is amortising with a target amount set at 1.5% of the portfolio outstanding balance in TABS 2022-CRE1. Any excess amounts become part of the available revenue receipts. As of the latest payment date, the liquidity reserve was at its target balance in all transactions.

Elavon Financial Services DAC, UK Branch (Elavon UK) acts as the account bank for all transactions. Based on DBRS Morningstar’s private rating of Elavon UK, 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 Class A Notes/Class A Loan Note/Loan Note in the transactions, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

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.

In TABS 2021-CRE1, the ratings on the Class C and Class E notes at A (sf) and BB (low) (sf), respectively, materially deviate from the ratings implied by the quantitative model. DBRS Morningstar considers a material deviation to be a rating differential 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. The ratings on the Class C and Class E notes reflect their sensitivity to a potential compression of the net excess spread between the assets and liabilities in a rising interest rate scenario as well as a potential decline in commercial real estate value.

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/401817/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 loan-level data and investor reports provided by U.S. Bank Trustees Limited and property-level data provided by TCFL.

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

At the time of the initial ratings on TABS 2021-CRE1 and TABS 2021-CRE2, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

At the time of the initial ratings on TABS 2022-CRE1, 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 TABS 2021-CRE1 and TABS 2021-CRE2 took place on 15 March 2022, when DBRS Morningstar confirmed its ratings on the rated notes.

The last rating action on TABS 2022-CRE1 took place on 13 June 2022, when DBRS Morningstar finalised its provisional ratings on the rated notes.

The lead analyst responsibilities for TABS 2022-CRE1 have been transferred to Natalia Coman.

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

To assess the impact of changing the transactions’ parameters on the ratings, 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 receivables are 10.1% and 10.3%, respectively, for TABS 2021-CRE1.
-- The base case PD and LGD of the current pool of receivables are 10.9% and 14.5%, respectively, for TABS 2021-CRE2.
-- The base case PD and LGD of the current pool of receivables are 10.0% and 13.1%, respectively, for TABS 2022-CRE1.
-- 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 TABS 2021-CRE1, for example, if the LGD increases by 50%, the rating on 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 on the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to AA (high) (sf).

For TABS 2021-CRE2, for example, if the LGD increases by 50%, the rating on the Class A Loan Note would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Loan Note would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Loan Note would be expected to fall to AA (low) (sf).

For TABS 2022-CRE1, for example, if the LGD increases by 50%, the rating on the Loan Note would be expected to fall to A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Loan Note would be expected to fall to A (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Loan Note would be expected to fall to BBB (high) (sf).

TABS 2021-CRE1:
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 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 AA (high) (sf)

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

Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating below B (low) (sf)
-- 50% increase in LGD, expected rating below B (low) (sf)
-- 25% increase in PD, expected rating below B (low) (sf)
-- 50% increase in PD, expected rating below B (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating below B (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (low) (sf)

TABS 2021-CRE2:
Class A Loan Note 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 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)

Class B 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 (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 (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 (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (low) (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 (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

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

TABS 2022-CRE1:
Loan Note 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 A (high) (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 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 B Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (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 (high) (sf)

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

Class D Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (sf)
-- 50% increase in LGD, expected rating of B (sf)
-- 25% increase in PD, expected rating of B (low) (sf)
-- 50% increase in PD, expected rating below B (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of B (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (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: 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: Natalia Coman, Assistant Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Dates:
TABS 2021-CRE1: 19 February 2021
TABS 2021-CRE2: 2 June 2021
TABS 2021-CRE2: 31 May 2022

DBRS Ratings Limited
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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 these transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.

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].

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