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 June 2023 payment date;
-- 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 the AAA (sf) rating level.

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 June 2023 payment date, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.6% and 0.2% of the outstanding principal balance, respectively, while loans more than 90 days delinquent represented 1.6%. To date, there have been nine repossessed properties, representing 0.15% of the initial portfolio balance, with cumulative recoveries of 90.9% realised.

Fastnet 15:
As of the June 2023 payment date, loans that were 30 to 60 days and 60 to 90 days delinquent represented 0.4% and 0.1% of the outstanding principal balance, respectively, while loans more than 90 days delinquent represented 1.5%. To date, there have been four repossessed properties, representing 0.04% of the initial portfolio balance, with cumulative recoveries of 87.9% realised.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
For Fastnet 14, DBRS Morningstar updated its base case PD and LGD assumptions on the remaining receivables to 4.2% and 12.8%, respectively. For Fastnet 15, DBRS Morningstar updated its base case PD and LGD assumptions to 3.8% and 12.2%, respectively. The higher loss assumptions at the base case level result from the recent release of DBRS Morningstar’s “European RMBS Insight: Irish Addendum”, which penalises portfolios of loans originated before 2010.

CREDIT ENHANCEMENT
The subordination of the respective Class Z notes and the general reserve funds provides credit enhancement to the respective Class A notes in each transaction. As of the June 2023 payment date, credit enhancement to the Class A notes in Fastnet 14 increased to 73.0% from 49.8% at the time of the previous annual review while credit enhancement to the Class A notes in Fastnet 15 increased to 74.3% from 50.1%.

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 June 2023 payment date:

-- For Fastnet 14: the general reserve fund was at EUR 25.4 million and the liquidity reserve fund was at EUR 3.5 million.
-- For Fastnet 15: the general reserve fund was at EUR 25.2 million and the liquidity reserve fund was at EUR 3.3 million.

The Bank of New York Mellon SA/NV, Dublin Branch (BNYM-Dublin) acts as the account bank for the transactions. Based on DBRS Morningstar’s 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.

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.

DBRS Morningstar analysed the transaction structures in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “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.

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 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 rating action on these transactions took place on 21 June 2022, when DBRS Morningstar confirmed its AAA (sf) rating on the Class A notes issued by Fastnet 14 and its 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.

Sensitivity Analysis: 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 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 4.2% and 12.8%, respectively.
-- For Fastnet 15, the base case PD and LGD assumptions for the remaining collateral pool are 3.8% and 12.2%, 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 on 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 on 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 on 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. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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
Initial Rating Dates:
Fastnet 14: 22 June 2018
Fastnet 15: 28 June 2018

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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 (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
-- European RMBS Insight Methodology (27 March 2023) and European RMBS Insight Model v6.0.0.0,
https://www.dbrsmorningstar.com/research/411634/european-rmbs-insight-methodology.
-- European RMBS Insight: Irish Addendum (5 June 2023),
https://www.dbrsmorningstar.com/research/415306/european-rmbs-insight-irish-addendum.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/interest-rate-stresses-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022), https://www.dbrsmorningstar.com/research/396929/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].