Morningstar DBRS Confirms Credit Ratings on Glenbeigh 2 Issuer Designated Activity Company and Glenbeigh 2 Issuer 2021-2 Designated Activity Company

DBRS Ratings GmbH (Morningstar DBRS) confirmed the following credit ratings on the notes issued by Glenbeigh 2 Issuer Designated Activity Company (GB2) and Glenbeigh 2 Issuer 2021-2 Designated Activity Company (GB2 2021-2):

GB2:
-- Class A notes at AAA (sf)
-- Class B notes at AA (high) (sf)
-- Class C notes at AA (sf)
-- Class D notes at A (high) (sf)
-- Class E notes at A (low) (sf)
-- Class F notes at BBB (sf)

The credit rating on the Class A notes addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date in March 2046. The ratings on the Class B and Class C notes address the ultimate payment of interest and principal on or before the legal final maturity date while junior, and the timely payment of interest while they are the senior-most class of notes outstanding. The ratings on the Class D, Class E, and Class F notes address the ultimate payment of interest and principal on or before the legal final maturity date.

GB2 2021-2:
-- Class A notes at AAA (sf)
-- Class B notes at AA (high) (sf)
-- Class C notes at AA (low) (sf)
-- Class D notes at A (high) (sf)
-- Class E notes at A (low) (sf)
-- Class F notes at BBB (low) (sf)

The rating on the Class A notes addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date in June 2050. The ratings on the Class B and Class C notes address the ultimate payment of interest and principal on or before the legal final maturity date while junior, and the timely payment of interest when they are the senior-most class of notes outstanding. The ratings on the Class D, Class E, and Class F notes address the ultimate payment of interest and principal on or before the legal final maturity date.

The credit rating 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;
-- 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 credit rating levels.

The transactions are securitisations of buy-to-let residential mortgage loans originated in Ireland by Permanent TSB plc and serviced by Pepper Finance Corporation (Ireland) DAC (Pepper Ireland).

PORTFOLIO PERFORMANCE
Delinquencies have been rising steadily over the last 12 months in both transactions.

For GB2, loans two to three months in arrears represented 0.9% of the outstanding portfolio balance as of December 2023, up from 0.6% in December 2022. Loans more than three months in arrears were 7.0%, up from 0.9% over the same period.

For GB2 2021-2, loans two to three months in arrears represented 0.6% of the outstanding portfolio balance as of December 2023, up from 0.3% in December 2022. Loans more than three months in arrears were 6.3%, up from 0.7% over the same period.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables for both transactions and updated its base case PD and LGD assumptions at the B (sf) rating level to 13.3% and 19.7%, respectively, for GB2 and to 12.7% and 20.9%, respectively, for GB2 2021-2.

CREDIT ENHANCEMENT
GB2:
As of the December 2023 payment date, credit enhancement available to the Class A, Class B, Class C, Class D, Class E, and Class F notes was 40.6%, 32.4%, 26.8%, 22.1%, 18.2%, and 15.5%, respectively, up from 33.3%, 26.4%, 21.6%, 17.7%, 14.4%, and 12.2% 12 months prior, respectively.

GB2 2021-2:
As of the December 2023 payment date, credit enhancement available to the Class A, Class B, Class C, Class D, Class E, and Class F notes was 38.9%, 30.9%, 25.6%, 21.6%, 17.5%, and 14.9%, respectively, up from 32.1%, 25.3%, 20.8%, 17.5%, 14.1%, and 11.8% 12 months prior, respectively.

Credit enhancement to the notes in both transactions is provided by the subordination of junior classes and a general reserve fund.

The general reserve fund in GB2 is currently funded to EUR 1.4 million, below its target of EUR 1.5 million, and the general reserve fund in GB2 2021-2 is currently funded to EUR 3.0 million, below its target of EUR 3.2 million. The general reserve fund targets in each transaction correspond with 2.5% of the original principal balance of the Class A notes, minus the liquidity reserve target amount. The general reserve funds are available to cover senior fees, interest, and principal (via the principal deficiency ledgers) on all classes of rated notes.

The liquidity reserve fund in GB2 is currently at its target of EUR 3.7 million and the liquidity reserve fund in GB2 2021-2 is currently at its target of EUR 7.3 million. The liquidity reserve fund targets in each transaction correspond with 2.5% of the outstanding principal balance of the Class A notes, and is available to cover senior fees and interest on the Class A notes.

Citibank N.A./London Branch (Citibank London) acts as the account bank for both transactions. Based on Morningstar DBRS’ private credit rating on Citibank London, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS’ credit rating on the notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS’ credit rating on the notes also addresses the credit risk associated with the increased rate of interest applicable to the notes if the notes are not redeemed on the Optional Redemption Date (as defined in and) in accordance with the applicable transaction documents.

Morningstar DBRS’ credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

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

ENVIRONMENTAL, SOCIAL, AND 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 structures in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the “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 transactions 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 DBRS Morningstar 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 credit ratings include investor reports provided by Citibank London and loan-level data provided by Pepper Ireland.

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

At the time of the initial credit 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 credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on GB2 took place on 23 March 2023, when Morningstar DBRS confirmed its credit ratings on the Class A, Class B, and Class C notes at AAA (sf), AA (high) (sf), and AA (sf), respectively, and upgraded its credit ratings on the Class D, Class E, and Class F notes to A (high) (sf), A (low) (sf), and BBB (sf), respectively, from A (sf), BBB (sf), and BB (high) (sf), respectively.

The last credit rating action on GB2 2021-2 took place on 28 April 2023, when Morningstar DBRS confirmed its credit ratings on the Class A, Class B, and Class C notes at AAA (sf), AA (high) (sf), and AA (low) (sf), respectively, and upgraded its credit ratings on the Class D, Class E, and Class F notes to A (high) (sf), A (low) (sf), and BBB (low) (sf), respectively, from A (sf), BBB (sf), and BB (high) (sf), respectively.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available at dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (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 at the B (sf) credit rating level are 13.3% and 19.7% respectively for GB2, and 12.7% and 20.9% respectively for GB2 2021-2.
-- The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumption.

GB2:
Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)

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

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

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

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

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

GB2 2021-2:
Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (low) (sf)

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

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

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

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

Class F Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD, expected credit rating of BB (high) (sf)
-- 50% increase in PD, expected credit rating of BB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of B (high) (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 credit 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:
GB2: 3 March 2021
GB2 2021-2: 16 September 2021

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

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

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

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 [email protected].