Morningstar DBRS Upgrades and Confirms Credit Ratings on Burlington Mortgages No.1 DAC

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes issued by Burlington Mortgages No.1 DAC (the Issuer):

-- Class A1 Notes confirmed at AAA (sf)
-- Class A2 Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)
-- Class C Notes confirmed at AA (high) (sf)
-- Class D Notes upgraded to AA (sf) from AA (low) (sf)
-- Class E Notes upgraded to A (high) (sf) from A (sf)

The ratings on the Class A1 and Class A2 Notes address the timely payment of interest and ultimate repayment of principal on or before the legal final maturity date in November 2058. The ratings on the Class B, Class C, Class D, and Class E Notes address the timely payment of interest once most senior, and the ultimate repayment of principal on or before the legal final maturity date.

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 February 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

The transaction is a static securitisation of a portfolio of prime Irish residential mortgage loans granted by EBS d.a.c. (EBS) and its fully owned subsidiary, Haven Mortgages Limited (Haven). The originators, which are part of the Allied Irish Banks banking group, also service their respective portfolios. The transaction closed in March 2020 with an initial portfolio balance of EUR 4,026.5 million, consisting exclusively of owner-occupied mortgages, 65.1% of which were originated by EBS and the remaining 34.9% by Haven.

PORTFOLIO PERFORMANCE
As of the February 2024 payment date, loans that were one month and two months in arrears represented 0.4% and 0.1% of the outstanding portfolio balance, respectively, while loans three to 12 months or more in arrears represented 0.3%. There have not been any repossessions to date.

PORTFOLIO ASSUMPTIONS AND KEY RATING DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 1.5% and 10.2%, respectively. The higher loss assumptions at the base case level result from the release of Morningstar DBRS’ “European RMBS Insight: Irish Addendum” methodology in June 2023. At the AAA (sf) rating level, the PD and LGD assumptions have improved to 16.9% and 26.9%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the rated notes. As of the February 2024 payment date, credit enhancement to the Class A1 Notes increased to 94.2% from 83.8% at the time of the previous annual review 12 months ago; credit enhancement to the Class A2 Notes increased to 23.4% from 20.9%; credit enhancement to the Class B Notes increased to 15.2% from 13.6%; credit enhancement to the Class C Notes increased to 10.7% from 9.5%; credit enhancement to the Class D Notes increased to 6.2% from 5.5%; and credit enhancement to the Class E Notes increased to 2.9% from 2.6%.

The transaction benefits from liquidity support in the form of a general reserve fund (GRF) and a Class A liquidity reserve fund (ALRF), funded at closing to EUR 3.8 million and EUR 26.0 million, respectively, through subordinated loans granted by the sellers. The ALRF, which has a target balance equal to 0.75% of the outstanding Class A Notes balance, is available to cover senior expenses and interest payments on the Class A Notes. The GRF, which has a target balance equal to 0.75% of the outstanding rated notes balance minus the ALRF balance, is available to cover senior expenses and interest payments on the senior-most outstanding class of notes as well as interest payments on subordinated notes subject to certain provisions. As of the February 2024 payment date, the GRF and ALRF were at their target balances of EUR 3.8 million and EUR 14.0 million, respectively.

Allied Irish Banks, p.l.c. (AIB) acts as the account bank for the transaction. Based on the reference rating of ‘A’ on AIB, one notch below the Morningstar DBRS Long-Term Critical Obligations Rating of A (high), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS’ credit ratings on the rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS’ credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transactions documents that are not financial obligations.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of defaults to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the term under which a long-term obligation has been issued

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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://dbrs.morningstar.com/research/427030.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: Master European Structured Finance Surveillance Methodology (7 March 2024), https://dbrs.morningstar.com/research/429051.

Other methodologies referenced in this transaction are listed at the end of this press release.

Morningstar DBRS 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 credit ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other Morningstar DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://dbrs.morningstar.com/research/421590.

The sources of data and information used for these ratings include investor reports provided by AIB and loan-level data provided by the European DataWarehouse GmbH.

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

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

Morningstar DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

Morningstar DBRS 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 15 March 2023, when Morningstar DBRS confirmed the ratings on the Class A1, Class A2, and Class B Notes at AAA (sf), AAA (sf), and AA (high) (sf), respectively, and upgraded the ratings on the Class C, Class D, and Class E Notes to AA (high) (sf), AA (low) (sf), and A (sf) from AA (sf), A (high) (sf), and BBB (sf), respectively.

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

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the ratings (the base case):

-- Morningstar DBRS 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 1.5% and 10.2%, respectively.

Class A1 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 AAA (sf)

Class A2 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 AAA (sf)

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

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

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

Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of A (low) (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 (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 (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS 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 Date: 16 March 2020

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (7 March 2024),
https://dbrs.morningstar.com/research/429051.
-- European RMBS Insight Methodology (27 March 2023) and European RMBS Insight Model v6.0.2.0,
https://www.dbrsmorningstar.com/research/411634.
-- European RMBS Insight: Irish Addendum (5 June 2023),
https://www.dbrsmorningstar.com/research/415306.
-- Legal Criteria for European Structured Finance Transactions (30 June 2023),
https://dbrs.morningstar.com/research/416730.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023),
https://dbrs.morningstar.com/research/420572.
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023),
https://dbrs.morningstar.com/research/420602.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/278375.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.