Morningstar DBRS Confirms Credit Ratings on Dilosk RMBS No. 5 DAC

DBRS Ratings GmbH (Morningstar DBRS) confirmed the following credit ratings on the notes issued by Dilosk RMBS No. 5 DAC (the Issuer):

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

The credit rating on the Class A notes addresses the timely payment of interest and the full payment of principal by the legal final maturity date in December 2060. The credit ratings on the Class B, Class C, Class D, Class E, and Class F notes address the ultimate payment of interest and principal, and the timely payment of interest while the senior-most class outstanding.

The credit 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.
-- Portfolio default rate (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 credit rating levels.

The transaction is a securitisation of buy-to-let and owner-occupied mortgage loans, originated and serviced by Dilosk DAC and granted to individuals, corporates, and pension trusts in the Republic of Ireland.

PORTFOLIO PERFORMANCE
As of June 2024, the 90+ day delinquency ratio and the cumulative default ratio were both 0.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions at the B (sf) rating level to 2.1% and 10.2% respectively.

CREDIT ENHANCEMENT
As of the June 2024 payment date, credit enhancements available to the Class A, Class B, Class C, Class D, Class E, and Class F notes were 23.4%, 12.6%, 8.0%, 5.0%, 3.0%, and 2.0%, respectively, up from 20.2%, 10.8%, 6.8%, 4.3%, 2.6%, and 1.7%, respectively, at the last annual review. Credit enhancement to the notes is provided by the subordination of junior classes and the general reserve fund.

The general reserve fund is currently at its target level of EUR 1.5 million, equal to 1.3% of the original principal balance of the rated notes and the Class Z1 notes, minus the liquidity reserve target amount. The general reserve fund is available to cover senior fees, interest, and principal (via the principal deficiency ledgers) on the rated notes.

The liquidity reserve fund is currently at its target level of EUR 2.7 million, equal to 1.3% of the outstanding principal balance of the Class A notes, and is available to cover senior fees and interest on the Class A notes.

BNP Paribas Ireland - Dublin Branch (BNP Paribas Dublin) acts as the account bank for the transaction. Based on the Morningstar DBRS private credit rating on BNP Paribas Dublin, 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 credit rating assigned to the Class A notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Natixis S.A. acts as the swap counterparty for the transaction. Morningstar DBRS' private credit rating on Natixis S.A. is above the First Rating Threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS's 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 Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781.

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" (6 August 2024): https://dbrs.morningstar.com/research/437540.

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 credit 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 Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include investor reports provided by Deutsche Bank AG/London, and loan-level data provided by the European DataWarehouse GmbH and Dilosk DAC.

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

At the time of the initial credit rating, Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit 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 this transaction took place on 7 September 2023, when Morningstar DBRS confirmed the credit rating on the Class A notes and upgraded the credit ratings on the Class B, Class C, Class D, Class E, and Class F notes.

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 for the Issuer at the B (sf) credit rating level are 2.1% and 10.2%, respectively.
-- 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.

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 AAA (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 AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (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 (high) (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 AA (high) (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 (high) (sf)

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

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

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

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

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Rating Date: 5 October 2021

DBRS Ratings GmbH
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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 (6 August 2024)
https://dbrs.morningstar.com/research/437540
-- European RMBS Insight Methodology (25 March 2024) and the European RMBS Insight Model v.9.0.0.0
https://dbrs.morningstar.com/research/430103
-- European RMBS Insight: Irish Addendum (22 April 2024),
https://dbrs.morningstar.com/research/431544
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024)
https://dbrs.morningstar.com/research/435278
-- Derivative Criteria for European Structured Finance Transactions (28 June 2024)
https://dbrs.morningstar.com/research/435260
-- Legal Criteria for European Structured Finance Transactions (28 June 2024)
https://dbrs.morningstar.com/research/435165
-- Operational Risk Assessment for European Structured Finance Servicers (6 August 2024) https://dbrs.morningstar.com/research/437543
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024)
https://dbrs.morningstar.com/research/437781

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.